The British Columbia Investment Management Corporation is expanding its proxy voting guidelines around racial diversity to cover Canadian-domiciled investee businesses.

“Proxy voting is a key shareholder right and powerful tool for BCI to drive action aligned to our clients’ best interests,” said Daniel Garant, executive vice-president and global head of public markets at the BCI, in a press release. “We consistently leverage voting to make our expectations clear and hold companies and their boards accountable on material issues like climate change and diversity.”

According to the latest edition of the firm’s proxy voting guidelines, it will vote against the chair of board nomination committees at Canadian investee companies if boards lack adequate racial or ethnic diversity. It implemented a similar rule in 2021, but it only applied to businesses domiciled in the U.S.

Read: BCI adopts more stringent ESG expectations for companies it invests in

We believe that boards should consider all forms of diversity in the director recruitment process,” wrote the BCI in the new guidelines. “We expect boards to adopt and disclose a formal diversity policy that includes targets and timelines to increase levels of diversity at both the board and senior management level.”

The guidelines, which were first established in 2000, are updated every two years. They describe how the BCI approaches various issues from a proxy voting perspective and provides guidance to investee companies on how it’s likely to vote during shareholder meetings. The 2023 edition also includes new rules about climate-related metrics and risk considerations during corporate audits.

The investment organization will withhold its support to boards that fail to ensure climate risk is incorporated into corporate disclosures in a rigorous and accurate manner. In addition, the BCI may vote against boards members, on an individual basis, at companies deemed to have an unsatisfactory performance on climate change risk management issues.

The latest version of the guidelines also includes a mandate for the investment organization to vote against board chairs who simultaneously serve as the chief executive officer. The BCI also said boards are more effective at appointing, monitoring and replacing CEOs when the existing one isn’t also leading the board. “Separating the roles assists in establishing an appropriate balance of power between management and directors, increases accountability and helps ensure that the board serves to represent the interests of shareholders, not management.”

Read: ESG factors at the heart of the BCI’s investing strategy