Once the most eligible asset manager is selected, asset owners can include ESG terms in the investment management agreement (IMA) to formalise their expectations.

Legal counsel can advise on specific and objective language. A legally enforceable side letter agreement, providing a formal record of the owner’s wishes and the manager’s intention to abide by them, is an alternative to writing ESGspecific requirements into the IMA. They can also be used to amend existing agreements.

Whilst including ESG-specific terms in IMAs and side letters are ways to hold a manager accountable to the ESG policies, practices and reporting agreed upon during the appointment process, an asset owner may instead, or additionally, focus on regular monitoring to ensure that their managers are consistently improving their implementation of the policies and practices agreed.

Contract topics

Example terms:

Investment approach

  • The Manager acknowledges that ESG issues have the potential to impact investment risks and returns and that considering these issues alongside traditional factors in investment decision-making can improve long-term risk-adjusted returns.
  • The Manager agrees to integrate ESG risks, opportunities and/or performance in their investment process.
  • The Manager will ensure that its staff receives adequate training, access to relevant data and information, including considering the extent to which ESG factors generate investment risks or opportunities.


  • In pursuing the investment objectives set forth in the Client’s (responsible) investment policy, the Manager will have a process for assessing and monitoring current or potential investments in relation to relevant long-term factors such as environmental, social and corporate governance issues (ESG factors).

Active ownership

  • The Manager shall act in line with all ESG integration and active ownership responsibilities as outlined in the Investment Management Agreement.


  • The Manager will report to the Client on the development and/or implementation of any policies, process and fund terms regarding ESG integration.
  • The Manager will report to the Client on how the manager considered ESG factors when making investments including any examples of where it impacted the investment decision during the reporting period.

For other examples and a model Investment Management Agreement, see ICGN’s Model Contract Terms Between Asset Owners and Managers.