Proxy advisory firm Institutional Shareholder Services (ISS) announced that it will no longer include diversity considerations such as gender and race in its voting recommendations for boards of directors in the U.S., in light of the increased political scrutiny on Diversity, Equity and Inclusion (DEI)-related practices.

The move by ISS forms part of a series of major adjustments being made to DEI policies by U.S. companies and investors, which began following a Supreme Court ruling that struck down Harvard’s use of race-based affirmative action criteria in college admissions, and led to increased scrutiny over the legality of key aspects of corporate DEI policies.

The phenomenon has picked up the pace since the election of Donald Trump, who signed an executive order after taking office eliminating DEI preferencing in federal contracting, and required contractors to affirm that they “will not engage in illegal discrimination, including illegal DEI.”

ISS has itself been a target of political action, with the company being warned in 2023 by 21 state Attorneys General that its support for DEI and climate-related issues at companies could be seen as being in violation of their duties to consider their clients’ financial interests.

In a statement announcing the changes, ISS said:

“In light of these developments, ISS will indefinitely halt consideration of certain diversity factors in making vote recommendations with respect to directors at U.S. companies under its proprietary Benchmark and Specialty policies.”

Specific changes listed by ISS include no longer considering boards’ gender, racial and ethnic diversity for director election or re-election vote recommendations.

ISS said:

“We anticipate that institutional investors and U.S. companies will have a range of perspectives on DEI, including whether and how companies can or should adapt their specific policies and practices to the evolving market and governmental activity. “