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Europe leads way in climate funds market with $325bn in assets

Euro_notesEurope accounts for more than three quarters of global assets in funds with a climate-related mandate, remaining the largest and most diverse climate funds market, according to Morningstar.

With a total asset value of $325 billion, Europe’s climate funds market is the largest in the world, ahead of China at $47 billion,which doubled in size in 2021, overtaking the US for the first time.

The US’s climate fund assets grew 45% to reach $31 billion, while the rest of the world doubled to $6.3 billion.

Morningstar’s report, titled ‘Investing in Times of Climate Change’, found that globally, assets in the 860 mutual funds and exchange-traded funds with a climate-related mandate doubled in 2021 to a total value of $408 billion.

The increase in assets was boosted by higher inflows and accelerated pace of product development.

Morningstar also found the number of funds with a climate-related mandate available in Europe saw significant growth, with the launch of 151 new climate funds and 52 more repurposed.

Of the funds Morningstar identified globally, those categorised as Climate Solutions and Climate Conscious overtook those categorised as Clean/Energy Tech as the largest categories in 2021, suggesting investors are interested in opportunities beyond the renewable energy sector.

Hortense Bioy, global director of sustainability research at Morningstar, said: “2021 saw major development in the climate funds universe globally, but especially in Europe.

“The introduction of the Sustainable Finance Disclosure Regulation in March ratcheted up the demand for innovative investment strategies incorporating climate considerations.”

She added: “Recent improvements in climate-related data enable asset managers to better understand and interpret the climate profile of companies and countries, and as a result, design strategies that meet investors' needs and preferences.”

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