Equity-minded investors can now better see the diversity of the senior leadership teams of listed firms before they invest, thanks to a new ruling by the Financial Conduct Authority (FCA).

The FCA ruling will come into play for firms with financial accounting periods starting from 1 April 2022 and will require listed companies to report and disclose information against targets on the representation of women and ethnic minorities on their boards and executive management teams.

The move shows that the financial regulatory body is ramping up the momentum in its mission to increase diversity in the financial services sector, especially in senior positions where diversity is largely absent, with a bottleneck of minority talent at lower levels.

The FCA plan to review the rules in three years to assess their effectiveness and check whether the targets are still appropriate.

If firms cannot meet their diversity targets, the new ruling forces them to explain why, ensuring greater responsibility for diversity, equity and inclusion among some of the country’s most successful companies, as well as more transparency over their progress.

However, the FCA allows flexibility for smaller firms or those based overseas. The rules also give employers the agency on what method of employee data collection they use to assess their targets.

The FCA ‘comply or explain’ statement targets include at least 40% of boards being female, at least one person in a senior board position being female, and at least one board member being from an ethnic minority background.

Sarah Pritchard, Executive Director of Markets at FCA, said: “As investors pay increasing attention to diversity at the top of the companies they invest in, enhancing transparency at board and executive management level will help hold companies to account and drive further progress.”