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Xylem

Q3 2023 Engagement case study: Gender diversity

Xylem applies intelligent technology to improve water efficiency in products such as smart meters and intelligent monitoring equipment. The company’s water infrastructure business provides a range of pumps, filtration and testing and treatment equipment to water utilities. Xylem also supplies commercial, residential markets with water and wastewater systems, and provides measurement and control solutions.

Objective:

Improve gender diversity within company leadership.

Background:

WHEB has been using our voting rights and engaging management in dialogue to encourage Xylem to improve its board-level gender diversity since 2019.

In a 2020 call, Xylem highlighted a range of 2025 sustainability goals it had set, one of which was based around gender parity in leadership. Xylem planned to implement measures to increase diversity in the talent pipeline to achieve this, focusing particularly on traditionally more difficult areas such as engineering and technology.

We continued discussing gender and reproductive rights in 20221 but expressed our concerns that gender goals had been pushed out without details of revised timelines. Xylem explained its female leaders had been disproportionately affected by COVID-19, so had chosen to redevelop policies and processes and after this would publish a revised goal.

Actions:

In a recent research trip to the US2, we met with Xylem to discuss the company’s water-saving technologies, carbon emission targets and diversity within the leadership team. Specifically, we asked about 2025 gender and minority leadership targets and emphasized the importance of flexible working arrangements for parents to enable improved gender diversity.

Outcome/Investor Contribution:

M3 - Company develops or commits to developing an appropriate policy or strategy to manage the issue.

Disappointingly, Xylem will likely miss its 2025 target for 35% female representation in leadership. Currently this figure sits at 25% and will be lowered further following the company's acquisition of Evoqua Water Technologies.

That being said, gender balance is now more equal at entry and mid-management level, ensuring a good female talent pipeline. It's our view that Xylem is genuinely trying to think creatively about reaching their target. For example, since setting targets in 2019, it has focused on enabling internal moves to even out diversity amongst teams, looking for talent from ancillary industries and implementing leadership programmes with strong female representation.

Still, there remains the hurdle of moving women into senior roles. We pushed on this point during the discussion to which the company responded that it has strengthened parental leave policies. We believe these measures, which include eight weeks of paid leave for all new parents and flexible working and time off, are progressive for a US company and hope they are sufficient to meet objectives.

We will continue to support the company in updating its original 2025 target and look forward to hearing about further developments in their strategies . In the meantime, we commend Xylem for its work to improve other measures of diversity and were pleased to hear it is on track to meet its target to reach 25% minority representation in leadership by 2025 as this figure currently sits at 21%.

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