Increasingly requested in Southeast Asian rounds, usually because the investor has its own obligations to its limited partners. VIMA publishes a model ESG side letter as part of its Singapore-law suite. The practical question for a founder is not whether to sign one, but whether the undertakings are proportionate to the company’s stage.
ESG Side Letter
Environmental, social and governance undertakings
Increasingly requested in Southeast Asian rounds, usually because the investor has its own obligations to its limited partners. VIMA publishes a model ESG side letter as part of its Singapore-law suite. The practical question for a founder is not whether to sign one, but whether the undertakings are proportionate to the company’s stage.
| Item | Detail |
|---|---|
| Company | [COMPANY NAME], UEN [UEN] |
| Investor | [NAME] |
| Date | [DATE] |
| Related to | The subscription agreement dated [DATE] |
| Reporting frequency | [Annually] |
| First report due | [DATE] |
| ESG contact at the Company | [NAME], [DESIGNATION] |
| Proportionality review | [Annually / at each subsequent round] |
| Governing law | Singapore |
1. Purpose and Proportionality
1.1The Investor and the Company recognise that managing environmental, social and governance matters supports long-term value and reduces risk.
1.2The undertakings in this letter apply proportionately to the Company’s size, stage and sector, and shall be reviewed [annually / at each subsequent financing] to ensure they remain so.
1.3Nothing in this letter requires the Company to incur expenditure disproportionate to its resources, or to implement a policy or system that a company of its size would not reasonably be expected to have.
1.4Clause 1.2 and 1.3 matter. An ESG letter drafted for a mature portfolio company, applied unmodified to a fifteen-person startup, generates reporting nobody reads and obligations nobody can meet. Negotiate proportionality expressly rather than relying on goodwill.
2. Baseline Undertakings
2.1The Company shall:
(a)comply with applicable environmental, employment, health and safety, data protection and anti-corruption law;
(b)not use forced labour or child labour, and take reasonable steps to satisfy itself that its material suppliers do not;
(c)maintain a workplace free from discrimination and harassment, with a grievance procedure and named contacts;
(d)pay employees lawfully and on time, with written key employment terms and itemised payslips;
(e)maintain work injury compensation insurance and comply with workplace safety obligations;
(f)not offer or accept bribes or improper payments, and maintain an anti-bribery position appropriate to its operations;
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These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.
Funds increasingly commit to their limited partners on ESG matters and pass those commitments down to portfolio companies. Understanding that explains both why the request arrives and why the investor may have limited flexibility on the reporting content — though usually more on timing and proportionality.
The Venture Capital Investment Model Agreements include an ESG side letter drafted for Singapore. Starting from it is faster than negotiating a bespoke document and is recognised by investors and their counsel.
Refusing ESG undertakings outright is rarely productive and is usually unnecessary — most of the baseline is legal obligation anyway. What is worth negotiating is proportionality: that undertakings scale with the company’s size and stage, and that reporting is not disproportionate to its resources. Clauses 1.2 and 1.3 do that work.
Written key employment terms, itemised payslips, work injury insurance, workplace safety obligations, a Data Protection Officer, and anti-discrimination practice are Singapore legal requirements. A company that cannot commit to Section 2 has a compliance problem, not an ESG problem.
A commitment to adopt a grievance procedure within twelve months is arbitrary. Tying it to reaching twenty-five employees — the Workplace Fairness Act first-phase threshold — means the company builds it when it is actually needed and required. Section 5 offers both columns for that reason.
Exclusion lists come from fund documents and can be broad. Check them against what the company might plausibly do in future, not only what it does today. A broad exclusion agreed casually can rule out a legitimate product line later.
An ESG breach should produce a remediation plan, not an event of default or a redemption right. A missed report or a policy adopted late is not a reason to unwind an investment. Clause 6.1 sets remediation as the primary consequence, and that is the position to hold.
An obligation to notify any ESG incident is unworkable. Clause 4.2 lists specific triggers — fatality or serious injury, material environmental incident, notifiable data breach, regulatory investigation, material allegation of discrimination or bribery. Specificity protects both sides.
ESG data includes workforce composition, incidents and grievances. Clause 4.4 restricts the investor to internal use and aggregated or anonymised reporting to its own investors. Without it, sensitive data can appear in a fund report in identifiable form.
A startup in serviced offices cannot meaningfully report electricity consumption or emissions. Schedule 1 marks those rows as applying where measurable. Committing to metrics you cannot produce leads to either fabrication or an annual apology.
The single most useful commitment is a named person responsible for ESG matters. Without an owner, every other undertaking becomes nobody’s job and the first report is assembled in a panic.
The report structure in Schedule 1 covers governance, people, safety, environment, data and compliance — the same ground a well-run board should review anyway. Companies that treat it as a genuine annual check get more from it than those that treat it as investor paperwork.
Grievance procedures will be mandatory for employers of twenty-five or more when the Act commences at the end of 2027. Building it under an ESG commitment now is easier than retrofitting under statutory pressure later, and it satisfies both.
A letter agreed at seed may be inadequate at Series B, and one agreed at Series A may be disproportionate if the company contracts. Clause 1.2 provides for review. Later investors will frequently want their own letter, and consolidating them is worth doing.
Reflects Singapore law and market practice current as of {{DATE OF USE}}. VIMA is periodically updated, ESG reporting expectations are developing quickly, and the Workplace Fairness Act and other obligations commence in stages — have any ESG side letter reviewed alongside the subscription documents.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, corporate secretary, or accountant as relevant) before you rely on it.