By Ross Kerber

(Reuters) – Top proxy adviser Institutional Shareholder Services (ISS) announced on Tuesday it will no longer consider the gender, racial, or ethnic diversity of U.S. company boards when making its voting recommendations.

In a statement posted on its website, ISS cited increasing attention on diversity, equity, and inclusion (DEI) practices in the U.S., highlighted by last month’s Presidential Executive Orders on DEI.

This change by ISS marks a significant shift in how executives and investors respond to efforts from the administration of former U.S. President Donald Trump to eliminate DEI considerations in both government and business.

Boardrooms across the S&P 500 have gradually become more inclusive since the Black Lives Matter movement of 2020, yet advancements for women and minorities have recently stalled as companies reassess their recruiting priorities.

Leading investors such as BlackRock and Vanguard have also started to downplay the importance of diversity in their stewardship policies. BlackRock has removed a 30% diversity target for boards, stating that 98% of S&P 500 boardrooms have already achieved that benchmark.

ISS announced that this change will affect both its benchmark policy and specialty policies, including those used by ESG funds, for reports published after February 25. The organization will continue to evaluate other board member attributes including independence, accountability, and responsiveness.

Competitor Glass Lewis did not respond to a request for comment on Tuesday but indicated it would review its approach if regulatory or legislative changes affect corporate issuers and investors.

Further details were not immediately provided by ISS regarding policy changes for European companies or any alterations to shareholder resolution recommendations.

Representatives from the U.S. Chamber of Commerce and the National Association of Manufacturers did not respond to requests for comments.

New York City Comptroller Brad Lander, who oversees public pension funds and advocates for diversity in boards and workforces, criticized ISS’s move, suggesting it aims to evade new federal regulations rather than serve investor interests. He stated, “Rather than standing up for independent proxy advice, they are preemptively throwing the value of diverse governance under the bus.”

ISS, BlackRock, and Vanguard have faced Republican scrutiny over their handling of social and environmental issues, despite growing investor interest in these areas. Climate activists and labor representatives have criticized ISS and Glass Lewis for insufficient support of their causes.