"I look around at the world and I see too many people who look like me, middle-aged white men, in positions like this," he wrote in a blog post. "So I've decided to stand aside and make space for others."
Instead, the new president will be Naresh Ramchandani, a Pentagram partner and founder of creative agency Karmarama, who was responsible for creating IKEA's iconic "chuck your chintz" campaign from the 1990s.
Rebecca Wright, the dean of academic programmes at Central Saint Martins, has been named Ramchandani's deputy for 2020/21 and will automatically succeed him as president the following year, as is the tradition at D&AD.
"Everyone in a position of influence needs to ask themselves what they can do right now. And that's why I've taken the decision that I have," said Terrett, who had been due to take over this year from current D&AD president Kate Stanners, chairwoman and global chief creative officer at Saatchi & Saatchi.
"I'm trying to help in a small way by creating a visible example that people can point at and say: why don't we do what they did?"
Terrett, who founded digital design consultancy Public Digital and was responsible for creating the UK government's award-winning website, will remain a trustee for D&AD and was quick to assert that his decision was not intended as a criticism of the body.
"I wanted to win the coveted Black Pencil from when I was young and I've wanted to be D&AD president for as long as I can remember," he said.
"I want to make one thing very clear. This is not a criticism of D&AD," he continued. "This statement is not really about D&AD, it's just that when I look back at previous presidents in all organisations, there has not been enough diversity. That's an indisputable fact."
In an interview with Campaign, Ramchandani affirmed that fostering greater racial and gender equality in the design industry and in D&AD's own company structure will be a key concern for the organisation going forward.
"Right now, the strongest chance for the industry to work towards a more sustainable and fairer future is for creatives, agencies and studios to reflect the audiences they're looking to connect to," he said.
"D&AD also needs to exemplify diversity in its own internal makeup, and we are creating a programme in order to do that. It has to understand that diversity does not have a simple fix."
The move comes at a turbulent time for the body. In June this year, D&AD chief executive officer Patrick Burgoyne stepped down after less than a year in the role amid cost-cutting measures that involved "significant" redundancies after the body's revenues were hit by the coronavirus pandemic.
Terrett's decision comes after this year's reckoning about institutional racism and the underrepresentation of black people and people of colour within the industry, spurred on by the death of George Floyd and the Black Lives Matter movement.
A 2018 Design Council report found that people of black, Asian and minority ethnic backgrounds (BAME) make up only 13 per cent of design industry employees and 12 per cent of managers in the UK.
That same year, research by the Design Museum found that only one in five British designers is female.
In response, a slew of initiatives have been established to tackle these issues, from the virtual Where are the black designers? conference to the interiors industry's United in Design project and architecture's Sound Advice platform.