The Financial Conduct Authority has finalised new rules requiring listed firms to disclose progress against diversity targets.

The rules will apply to listed companies for financial accounting periods starting from 1 April.

The rules require listed companies to report information and disclose against targets on the representation of women and ethnic minorities on their boards and executive management.

If firms cannot meet the diversity targets set by the regulator they will be required to explain why not. The FCA said this approach allowed flexibility for smaller firms.

The targets set include at least 40% of the board should be women, at least one of the senior board positions should be a woman and at least one member of the board should be from an ethnic minority background.

The targets also apply to key board committees.

The FCA rules also allow firms to decide how best to collect data from employees to demonstrate they are meeting the targets.

Sarah Pritchard, executive director of markets at the FCA, said: "As investors pay increasing attention to diversity at the top of the companies they invest in, enhancing transparency at board and executive management level will help hold companies to account and drive further progress."

The finalised rules were welcomed by the Chartered Insurance Institute but the professional body said more affirmative action is needed.

A spokesperson from the Chartered Insurance Institute said: "Whilst we welcome the FCA’s policy statement this morning, we feel that what is still needed involves dedicated constructive planning and affirmative action to get to where we collectively feel we should be heading for the benefit of all.

"The Chartered Insurance Institute (CII) actively measures the diversity of its Board and Executive Committee with identified actions and has long maintained that the key to innovation and success is found in properly accessing the diversity of ideas found within the full breadth of society.

"It is important to accept and understand that when our talent pool is limited, we are in fact limiting ourselves as an organisation, and therefore limiting the benefits we can bring to those we serve."