Why are investment mandates important for ESG investing?

Investment mandates are crucial for ESG (Environmental, Social, and Governance) investing because they serve as formal contracts that outline the specific requirements and expectations for asset managers concerning ESG criteria. These mandates establish clear guidelines on how the asset manager should integrate ESG factors into their investment processes, ensuring alignment with the asset owner's sustainability goals.

By detailing aspects such as the selection of investments, risk management protocols, and reporting requirements related to ESG factors, investment mandates help facilitate transparency and accountability in the investment process. This structured approach ensures that asset managers are not only aware of but also committed to adhering to the ESG standards specified by the asset owners. The emphasis on ESG integration within these mandates reflects the growing recognition of the importance of sustainability in investment decisions.

The other options lack the comprehensive nature of investment mandates in defining the relationship and responsibilities between asset owners and asset managers, thus making option B the most suitable choice.