On 20 April 2022, the UK Financial Conduct Authority (“FCA”) published its Policy Statement PS 22/3 on disclosures regarding diversity and inclusion targets for the boards and executive committees of UK-listed companies. These measures reflect the growing importance of  Environmental, Social and Governance (“ESG”) considerations, and have gained particular traction in the financial services sector, forming a key part of investment decisions. Indeed, July 2021 saw the FCA hone in on the “S” and “G” components on ESG with its initial consultation on D&I-related proposals.

The disclosures proposed under the policy statement (see Appendix 1) enhance market participants’ engagement with ESG, building on, and amending, the Listing Rules (“LRs”) and Disclosure Guidance and Transparency Rules (“DTRs”). Amendments to the LRs and DTRs oblige in-scope companies to annually disclose whether they meet specific diversity targets in relation to gender and ethnicity.

What are in-scope companies required to disclose?

Applicable to UK and overseas issuers with a premium or standard listing, amended LR9 and LR14 introduce ongoing listing obligations. In-scope companies must include a statement in their annual financial report setting out whether they have met specific board diversity targets, including:

  1. at least 40% of the board to be women;
  2. at least one of the senior board positions (Chair, Chief Executive Officer, Chief Financial Officer or Senior Independent Director) to be held by a woman; and
  3. at least one director to have a minority ethnic background.

The disclosures must be made by reference to a specific reference date selected by the company during the relevant accounting period.

In-scope companies are further mandated to: (1) make numerical disclosures in standardised reporting tables on board composition and senior levels of executive management by either sex or gender and ethnic identities (see Annex 2 to the LRs); (2) show how diversity policies apply to board and executive committees; and (3) clarify the elements of diversity to which such diversity policies relate.

These disclosures are to be made on a “comply or explain” basis, such that those in-scope companies that do not meet the targets will need to explain why. Where in-scope companies have members of their board or executive management situated overseas, and local law restricts the collation and publication of relevant data, they may instead explain the extent to which they are unable to make the numerical disclosures. In-scope companies must also provide an explanation of their data collation approach. Guidance as to what this explanation should entail has been issued under LR 9.8.6IG and LR 14.3.36G, highlighting the need for consistency in approach, and an overview as to the methodology or source of the data used.

The FCA has also issued additional guidance on disclosures under LR 9.8 and LR 14.3. As part of their annual reports, in-scope companies may also wish to include the following information:

  1. A brief summary of any key policies, procedures and processes that contribute to improving board and executive management diversity;
  2. Any mitigating factors or circumstances that make achieving board diversity more challenging; and
  3. Any risks the company has identified in meeting board diversity targets in the next accounting period, or any plans to improve diversity.

The FCA has also extended DTR 7.2.8AR to require in-scope companies with a diversity policy to describe their particular policy for remuneration, audit and nominations committees. Diversity policy reporting will have to take stock of wider diversity characteristics, comprising ethnicity, sexual orientation, disability and socio-economic background.


The disclosures come into force for financial years beginning on or after 1 April 2022 (with a view to be assessed after three years). This means that the new disclosures will effectively appear in in-scope companies’ annual reports from Q2 2023 onwards.

The FCA has, nonetheless, encouraged companies whose financial years began before 1 April 2022 to consider voluntarily reporting on D&I targets.  Given the prominence of ESG, coupled with existing voluntary D&I initiatives (including the FTSE Women Leaders Review; the Hampton-Alexander Review and the Parker Review), it will not be surprising to see any such voluntary reporting in an effort to attract investors in an increasingly competitive marketplace.

Practical Steps

In-scope companies should begin to take stock of their D&I initiatives and ready themselves for the new disclosure regime. They should be particularly astute to:

  1. Defining and identifying “executive management” for the purposes of understanding which individuals will be in-scope for the new rules;
  2. How relevant data will be collated, including the nature of the data collection process and associated disclosures; and
  3. Any mitigating factors or circumstances that may make achieving board diversity more challenging.