Proxy advisory firm Institutional Shareholder Services (ISS) released updates to its 2021 benchmark proxy voting policy, with the biggest changes this year addressing racial, ethnic, and gender diversity on boards. The updated policy will generally be applied for shareholder meetings on or after Feb. 1, 2021.

“Against the backdrop of the COVID-19 pandemic, institutional investors, companies and other interested market constituents globally have provided thoughtful feedback on a wide range of issues through the ISS annual benchmark policy survey, multiple virtual policy roundtables and discussions, and through our public open comment period on proposed changes,” said Georgina Marshall, global head of research and ISS global policy board chairperson, in a press release.

In response to feedback received, the ISS said its research reports in 2021 will highlight corporate boards in the Russell 3000 or S&P 1500 that “lack racial and ethnic diversity (or lack disclosure of such), with the goal of helping investors identify companies with which they may wish to engage and to foster dialogue between investors and companies on this topic.” The ISS said its U.S. benchmark policy will not use a lack of racial and ethnic diversity as a factor in its vote recommendations on directors in 2021.

For 2022, however, where Russell 3000 or S&P 1500 boards have no apparent racial or ethnically diverse members, and no mitigating factors are identified, ISS policy “will provide for recommending voting against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis).”

“Aggregate diversity statistics provided by the board will be considered if they are specific to racial and/or ethnic diversity,” the ISS said. “Mitigating factors will include the presence of a racial and/or ethnic minority on the board at the preceding annual meeting and a firm commitment to appoint at least one racial and/or ethnic diverse member.”

Recent research conducted by BoardProspects, a board recruitment platform provider, indicates corporate boards within the Russell 3000 have made significant diversity progress since the May 25, 2020, murder of George Floyd and the subsequent reinvigoration of the Black Lives Matter social justice movement. According to BoardProspects, 130 Black board members were appointed within the Russell 3000 in the five months following Floyd’s death, compared to just 38 Black board members appointed in the five months prior to his death—a 239 percent increase.

According to BoardProspects’ research, companies that went from having no Black board members to two include Ralph Lauren, Dick’s Sporting Goods, Pinterest, BorgWarner, and Zogenix. Several more companies have added at least one, including Expedia, Under Armour, Procter & Gamble, Hilton, Chipotle, and Wynn Resorts.

Regarding gender diversity, the ISS has increased its minimum board gender diversity policy thresholds across numerous markets, to be implemented in 2021 and 2022. Generally, ISS policies provide recommending a vote against the nomination committee chair (or other directors on a case-by-case basis) where boards do not meet minimum gender diversity thresholds. The regions that will face these new requirements include Canada, the United Kingdom, Ireland, continental Europe, and Latin America.

Also, the ISS will update all global policies regarding director accountability for material failures of governance and risk oversight. “ISS policies globally will explicitly note that significant risk oversight failures related to environmental and social concerns may constitute material governance failures, and as such, may trigger vote recommendations against board members,” the organization stated.