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With $325 billion in assets, Europe is the market leader in climate funds

According to Morningstar, Europe accounts for more than three quarters of global assets in climate-related funds, making it the largest and most diverse climate funds market.

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

Assets in the US climate fund increased by 45 percent to $31 billion, while assets in the rest of the world more than doubled to $6.3 billion.

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

Higher inflows and a faster pace of product development aided the increase in assets.

Morningstar also discovered that the number of climate-related funds available in Europe increased significantly, with 151 new climate funds launched and 52 more repurposed.

In 2021, the funds classified as Climate Solutions and Climate Conscious surpassed those classified as Clean/Energy Tech as the largest categories, indicating that investors are interested in opportunities outside of the renewable energy sector.

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

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

"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," she continued.



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