Upfront clarity can set the course for effective engagement in the private markets, but dialogue and data are needed to ensure alignment throughout the investment journey.
While public markets remain the bedrock of institutional portfolios, asset owners are increasingly looking toward private markets — including private equity, infrastructure, and private credit — to complement their existing strategies. For many, this is less a transition away from public markets, more a strategic expansion into assets that offer unique levers for both financial performance and real-world impact.
According to recent data, average private markets allocations among global institutional investors reached a record high of 12.5% in early 2026, with nearly 90% of investors planning to either increase or maintain their exposure over the coming years – driven both by voluntary commitments and regulatory shifts.
From a financial perspective, the pursuit of diversification remains paramount, cited by over 75% of institutional investors as their primary motivation. In an era of heightened public market volatility, the ‘illiquidity premium’ associated with private assets is increasingly seen as a vital tool for generating long-term, risk-adjusted returns that can support beneficiary outcomes.
In parallel, asset owners see a distinctive role for the private markets in achieving sustainability and impact objectives. Unlike the public sphere, where influence is often broad but indirect, private markets can allow for additionality — for example directly funding the infrastructure and innovation required for the net zero transition. Whether through renewable energy projects, nature-restoration initiatives, or supporting high-growth science and technology firms, private capital is increasingly viewed as a catalyst for systemic resilience.
Distinctive stewardship challenges
But private markets investments also come with their own distinctive stewardship challenges. While public markets investors use well-established channels to engage and influence corporate behaviour, the dynamics and processes are different for a private markets holding via an investment manager with a sole or majority stake. While this provides the manager with greater control over a company’s direction, it places the asset owner or limited partner (LP) in a position of indirect influence.
As highlighted in this Q&A, effective stewardship begins with the selection of general partners (GPs) who are fundamentally aligned with the asset owner’s priorities. Misalignment can lead to friction, particularly when a GP’s exit strategy or short-term objectives conflict with the asset owner’s long-term sustainability goals.
In all contexts, stewardship remains a partnership between asset owner and manager, with transparency at its core. One of the primary hurdles for LPs is the availability and quality of data on private markets holdings, which often lacks the standardisation seen in public disclosures. This is particularly acute for emerging risks such as biodiversity loss and cyber security, where independent assessments and board-level oversight are critical to protecting value.
While disclosure in the private markets is likely to develop and standardise via voluntary initiatives, regulation is shaping both demand and supply.
In the UK, the Mansion House Accord, a voluntary commitment from 17 of the country’s largest pension providers, has sets an ambitious target of allocating at least 10% of default funds to private markets by 2030. This has the potential to unlock billions for domestic growth sectors, potentially via long-term asset funds (LTAFs), recently launched vehicles designed to offer open-ended vehicle for investment in illiquid assets across venture capital, private equity and credit, real assets and infrastructure.
Our experts point to the role of semi-liquid funds as a potential bridge, helping to align the long-term horizons of pension savers with the life cycles of the underlying assets. Ultimately, the goal of stewardship in private markets is to enable portfolio companies to meet their full potential, ensuring that decarbonisation plans, climate risk assessments, and governance frameworks are not just ‘box-ticking’ exercises, but core drivers of asset performance.
In this Q&A, we explore these themes in depth, outlining how asset owners can steer through the complexities of private market stewardship to deliver lasting value for their members and the planet.
Q1: What are the main challenges for asset owners in conducting stewardship over portfolio companies and other asset holdings in private markets portfolios?
Lorenzo Saa, Chief Sustainability Officer, Clarity AI:
“A core challenge is that influence is typically exercised indirectly, through GPs rather than directly with portfolio companies. Unlike in listed markets, asset owners cannot retain engagement or proxy voting rights when delegating capital to a GP. As a result, LPs rely heavily on the GP to represent their interests in governance, strategy, and sustainability oversight. They must ensure alignment with the GP’s responsible investment approach from the outset and monitor alignment over time, as the GP effectively acts as steward of the underlying asset.
“Transparency is another structural challenge. Private companies are not subject to the same disclosure requirements as listed firms, meaning asset owners often have less direct visibility into underlying operations, risks, and sustainability performance. They therefore depend heavily on the quality, consistency, and timeliness of information provided by the GP. In practice, levels of transparency vary significantly across managers, and asset owners can sometimes struggle to obtain the level of visibility they need to feel properly engaged with their holdings.
“In many ways, stewardship in private markets resembles the bobsleigh runs we saw in the Milano-Cortina Winter Olympics: asset owners help set the direction, but the GP is the pilot steering the sled. Alignment and trust need to be established from the very start.”
Dimple Patel, CEO, NatureMetrics:
“Stewardship requires information, and across private markets portfolios, the data infrastructure for nature hasn’t kept pace with investor ambition. Most private assets sit in sectors with significant nature risks and dependencies: infrastructure, real assets, and supply chains. However, investors rarely have site-level data on ecosystem health or function to guide their stewardship. Even where data exists, it has been collected using inconsistent methodologies and reported in different formats across asset managers, making it almost impossible to set meaningful portfolio-level targets or track progress against frameworks like Taskforce on Nature-related Financial Disclosures (TNFD) or Science-Based Targets for Nature (SBTN).
“The deepest challenge is that nature continues to be treated as a qualitative ESG topic rather than a quantifiable risk driver. Until investors are able to connect ecosystem condition to investment return timelines, asset valuations and cost of capital, it will be deprioritised as part of due diligence when deals get competitive.
“Standardised nature risk and ecosystem health indicators – applied consistently across portfolios and geographies – help close the gap and increase the tradability of verified nature-positive assets.”
Chris Carrano, Head of Strategic Research, Venn by Two Sigma:
“Effective stewardship typically requires an understanding of an asset owner’s total portfolio objectives, ensuring investments are managed in a way that aligns with overall risk and return goals. However, understanding how private investments contribute to total portfolio risk and return, alongside liquid assets, can be challenging due to the infrequent, non-standardised, and manager-reported nature of private markets data.
“Consequently, asset owners often face structural information barriers when overseeing private market exposures within the broader portfolio. While governance and engagement mechanisms remain important, improved measurement frameworks and portfolio analytics can help translate private market exposures into a clearer view of their economic impact at the total portfolio level.”
Q2: What support should asset owners expect from GPs in facilitating oversight of portfolio companies and assets?
Jo Sharples, Partner and Chief Investment Officer, Aon DC Solutions:
“As a minimum, we’d expect GPs to provide asset owners with full transparency and disclosure of the underlying portfolio companies and assets, and the engagement activity undertaken on their behalf.
“Alignment is key; by working closely with GPs, asset owners can understand their priorities and goals, and assess how these align with their own. This alignment feels particularly important given the greater control of the GP over the underlying assets, particularly where they have a sole / majority ownership stake.
“This is likely to be an iterative process with discussions become more detailed as the portfolio matures. These are key to building trust and we would expect asset owners and managers to work together to agree how best to disclose on activity. Success requires an open mind and a willingness to commit time and resource.”
Dr. Henning Stein, Finance Fellow, Cambridge Judge Business School:
“Having advised GPs and LPs, I’ve seen the relationship shift to an active, transparency-driven partnership where asset owners expect granular, investment-level data. Support often goes beyond high-level NAV updates to include raw data on principal adverse impacts and sustainability milestones embedded directly within value creation plans.
“The most effective GPs provide LPs with direct access to operating teams to discuss long-term asset resilience, ensuring that stewardship is treated as a core component of the ‘illiquidity premium’ rather than a compliance exercise. By delivering ‘decision-ready’ data through integrated portals rather than static reports, GPs enable LPs to move from monitoring to genuine oversight of asset de-risked over the holding period.
“The primary barriers to this level of oversight remain information asymmetry and the administrative burden of manual data collection, which often results in significant reporting lags. GPs frequently cite confidentiality to limit the granularity of shared data, while mid-market firms may lack the specialists to manage complex flows. To overcome these constraints, LPs increasingly use side letters to hard-code specific transparency requirements into the limited partnership agreement from the outset. A growing distinction between basic reporting as a manager-absorbed expense and asset-specific sustainability audits as fund-level expenses is ensuring that oversight costs are clearly linked to value preservation, effectively aligning the GP’s operational efforts with the LP’s long-term fiduciary requirements.
“At the Cambridge Centre for Endowment Asset Management at Cambridge Judge Business School. Elroy Dimson and Oğuzhan Karakaş have demonstrated stewardship is significantly more successful when investors act as a unified bloc, particularly when a ‘lead investor’ with higher stakes and a credible reputation spearheads the initiative.”
Rhyadd Keaney-Watkins, Head of ESG, Arjun Infrastructure Partners:
“Alignment should be examined early and revisited regularly. Due diligence provides an opportunity to assess not only policies and contractual commitments (e.g. through fund strategy documentation), but also a manager’s track record of engaging portfolio companies and delivering measurable outcomes. Genuine ESG expertise and an ability to positively engage co-shareholders and management teams, commercially, is essential to successful delivery.
“Once alignment is established, LPs should expect:
- Evidence that stewardship commitments are operationalised. This includes investment committee materials that assess ESG risks and opportunities alongside financial considerations, and asset management plans that translate these insights into operational priorities.
- Meaningful governance at portfolio company level. Effective stewardship depends on portfolio company boards actively overseeing material issues such as climate resilience, health and safety, cyber security and stakeholder engagement. Where assets are held alongside co-investors, alignment of ambition may also need to be reinforced through shareholder agreements.
- Decision-useful reporting. ESG data in private markets remains imperfect (to say the least), with particular challenges in the mid-market where reporting capabilities are still developing. GPs therefore play an important role in supporting portfolio companies to build robust processes.”
Q3: How can and should asset owner stewardship of private markets portfolio assets evolve from entry to exit?
Jo Sharples, Aon DC Solutions:
“For a new asset, initial engagements will be about understanding the sustainability risks and how the GP plans to manage and prioritise these. As an example, asset owners might expect a transition plan to be in place for each asset, particularly for more energy-intensive assets. Where health and safety considerations are identified to be a key risk, we’d expect to see a plan to mitigate these. Following this, we’d expect KPIs to be set and monitored by the GP, with regular reports back on progress.
“As the portfolio matures, we would expect the emphasis to move to how risk identification / mitigations plans are being executed and performance against those KPIs. As part of this, there should be a natural refresh cycle to ensure risks are not being overlooked. Additionally, asset owners may wish to consider increased use of more direct relationships and the leverage this affords over sustainability factors.”
Rhyadd Keaney-Watkins, Arjun Infrastructure Partners:
“In private infrastructure, stewardship should typically progress from ‘intent’ at entry, to ‘demonstratable improvement’ at exit.
“At entry, expectations should be embedded through both contractual arrangements and operational planning. This means establishing a baseline, strengthening governance structures, establishing reporting processes and integrating ESG due diligence findings to inform the asset management plan.
“During the hold phase, stewardship and engagement should be closely linked to broader operational delivery and be aligned with the business plan. Reporting should move beyond baseline monitoring to tracking specific year-on-year improvements. In some cases, performance indicators can be linked to management incentives.
“Approaching exit, stewardship increasingly forms part of the investment narrative. Potential buyers are increasingly looking for assets that are well prepared for structural change. This may include credible transition planning, climate resilience, cyber security maturity and a clear understanding of regulatory and stakeholder dynamics.
“This approach can help ensure stewardship is reflected not only in policies and processes, but also in operational performance and long-term asset quality.”
Lorenzo Saa, Clarity AI:
“Asset owners should pay attention to their relationship with GPs and portfolio firms from the beginning to end of the investment.
“They need to select managers whose approach to responsible investment aligns with their own expectations. Manager due diligence should assess the GP’s responsible investment policies, governance structures, track record in managing ESG risks and opportunities, and how sustainability considerations are integrated into investment decision-making.
“Over the life of the fund, asset owners need to monitor how GP commitments are implemented in practice through reporting, advisory committee participation, and regular dialogue. To maintain alignment and transparency throughout the relationship, some large asset owners have publishing clear responsible investment expectations for managers.
“With underlying portfolio companies, asset owners must ensure sustainability considerations are integrated from acquisition, through ownership, and ultimately to exit. Good practice increasingly includes ESG due diligence before acquisition, operational improvement plans during ownership, and demonstrable improvements in governance, resilience, and transparency by the time the asset exits.”
Q4: How can information flows from GPs change to support exercise of stewardship by asset owners over portfolio companies and assets?
Georgina Thomas, Head of Impact, Cibus Capital:
“Information flows between GPs and LPs are often framed as a question of reporting. In practice, the quality of stewardship depends more on engagement than on the volume of data provided.
“GPs will generally report in line with the requirements set out in fund documentation. But effective stewardship rarely comes from static reporting alone. The most constructive relationships are with LPs who actively engage with the information provided. They ask questions about the data, challenge methodologies, and use the reporting as the basis for deeper discussion about progress and priorities across the portfolio.
“That engagement is very powerful. When LPs ask targeted questions or request discussion on specific issues, it strengthens the GP’s ability to drive change internally. It creates a clear signal that sustainability performance matters to the providers of capital, which in turn helps influence investment teams and portfolio company boards. In that sense, LP engagement becomes one of the strongest drivers of progress.
“There is also an opportunity to move towards more meaningful portfolio-level discussions. Periodic reviews that examine trends across the portfolio highlight areas of progress and identify where companies are falling behind can provide a much more useful basis for stewardship than data alone.
“Ultimately, better information flows are less about more reporting and more about better dialogue.”
Lorenzo Saa, Clarity AI:
“Stewardship in private markets works best when asset owners aren’t flying blind. Historically, GPs provided periodic, static reporting, often quarterly. That’s evolving, but it’s not about encouraging short-termism. It’s about ensuring that asset owners have enough timely, material visibility to steward effectively without losing the long-term perspective.
“Some progress is underway. Initiatives like ESG Data Convergence Initiative are helping standardise core metrics, reducing friction and ensuring that data is comparable. But asset owners increasingly need both portfolio-level transparency and a look-through visibility to key company-level developments. The goal is not to micromanage portfolio companies, but to see when a significant sustainability risk or opportunity emerges. Ultimately, better information flows allow asset owners to ask the right questions, track progress, and ensure that stewardship remains grounded in long-term value creation.”
Q5: What are the keys to effective escalation in the private markets realm, taking account of a typically higher ownership stake vs fewer formal channels for leverage?
Jo Sharples, Aon DC Solutions:
“While there are fewer formal channels for leverage, the GP’s higher ownership stake potentially offers far greater control and influence. It also makes effective engagement between asset owner and manager super important to understand priorities.
“Given this greater control, it becomes increasingly important for asset owners to ensure alignment with their own stewardship priorities. Ideally this would be identified upfront, but beneficial to keep under review, particularly if there are meaningful changes within the GP.
“Through these engagements, asset owners can escalate where they see misalignment or where they believe the GP is not acting in their interest. This is where pooling efforts with other asset owners can be beneficial. One effective route is where the asset owner secures a seat on an advisory board or similar oversight committee, providing valuable insights and the potential for more control.
“The last resort is exit, although this can be difficult in a closed-ended fund.”
Q6: Given the sector’s typically fixed investment horizons, how can long-term stewardship objectives be better integrated into private markets models?
Dimple Patel, NatureMetrics:
“Fixed investment horizons are frequently cited as a barrier to long-term stewardship, but a five-to-ten-year holding period is entirely sufficient to set meaningful nature-related objectives and deliver measurable progress, provided those objectives are anchored to credible baselines and tracked with quantifiable indicators. Ecosystem degradation and biodiversity loss are not abstract future concerns; they are increasingly acute financial risks within current holding periods, affecting water availability, agricultural productivity and regulatory exposure in ways that are already affecting asset valuations.
“The emergence of systemic stewardship, where investors collaborate on shared nature outcomes at the level of watersheds or critical habitats, is where private markets have an opportunity to lead. The key enabler is common data. Without standardised, comparable biodiversity metrics, systemic stewardship remains a statement of intent. With them, multiple managers can contribute to shared commitments and track collective progress with the scientific and regulatory credibility that global frameworks like the Global Biodiversity Framework and the TNFD demand.”
Chris Carrano, Venn by Two Sigma:
“While individual private market funds operate within fixed investment horizons, asset owners themselves are typically long-term or even perpetual investors. Therefore, integrating stewardship objectives into private markets may require focusing less on the life cycle of any single fund and more on how those investments contribute to long-term portfolio outcomes.
“From that perspective, the key challenge is understanding how private assets contribute to the broader economic risks and opportunities faced by the total portfolio, including systemic or macro risks. Improved measurement and transparency can help asset owners better evaluate how private market exposures align with long-term portfolio objectives, enabling more informed engagement with managers and more consistent oversight across investment cycles.”
Rhyadd Keaney-Watkins, Arjun Infrastructure Partners:
“Infrastructure assets are long-lived and often continue providing essential services well beyond the life of a typical investment fund. Their performance has direct implications for the long-term interests of pension beneficiaries and other asset owners. Also, private infrastructure investment, which provides essential public services for private profit, can only operate under responsible stewardship which seeks to safeguard and enhance these assets over the long term. Although fund horizons are finite, stewardship should focus on strengthening value drivers that persist across successive owners.
“One priority is building resilience. Infrastructure assets operate within evolving regulatory, technological and physical environments. Engagement may therefore include developing net zero transition plans (which, for example, derisks future decarbonisation capex) or undertaking climate risk assessments to understand potential exposure to extreme weather and operability risk. Portfolio companies can also be supported in strengthening cyber security frameworks, informed by independent assessments and board-level oversight. Another consideration is how sustainability expectations and ambition are embedded within governance, for example through formal board approval of transition planning.
“Decarbonisation, climate risk and regulatory change are already shaping asset performance and financing conditions, reinforcing the link between stewardship and long-term value creation.”
Jo Sharples, Aon DC Solutions:
“There’s a really important role for evergreen or semi-liquid funds to help navigate this gap, as moving away from the traditional fixed-term horizon potentially brings better alignment with the long-term investment horizon of many asset owners. That said, it’s still important to think about risks in the short and medium term, as this will impact values and hence returns.
“Importantly, effective stewardship should allow the underlying companies to do more and meet their potential, ultimately delivering a higher value and higher returns to investors, so there is strong alignment of interests. Partly, it comes down to asset owners to prioritise what matters and engage with their GPs.”
Photo: Rede do Esporte, CC BY 3.0 br, https://commons.wikimedia.org/w/index.php?curid=139133283
