Transition funds drive record climate assets

Record Growth in Climate-Related Assets

Global assets in open-end funds and ETFs with climate-related mandates reached an all-time high of $644 billion in June 2025, marking an 8.5% increase since the end of 2024, according to Morningstar data. Europe remains the main growth driver, holding 86% of these assets, while gains in China and the US were more modest.

Rise of Climate Transition Funds

In the first half of 2025, climate transition funds—supporting companies shifting to a low-carbon economy—grew by 16% to $318 billion worldwide. Green bond funds increased by 14% to $44 billion, matching the size of clean energy and technology funds, which declined 1.8% after several years of weaker results.

Investor Preferences and Market Trends

Despite an overall outflow of $13.8 billion from the climate funds sector in H1 2025, transition funds attracted $2.5 billion in new investments. Conversely, about $12 billion was withdrawn from climate solutions and clean energy or technology funds.

“Investors continued to favour transition strategies despite wider outflows across the climate funds space,” according to Morningstar.

Morningstar also highlighted that, even with a rebound in green energy stocks, investor sentiment remained cautious amid global economic uncertainties, regulatory challenges, and geopolitical risks.

Transition Finance as a UK Growth Driver

Passive funds tracking Paris-aligned benchmarks saw $1 billion in inflows, emphasizing the importance of transition finance for the UK’s green growth initiatives.

Author’s summary: Climate transition funds saw record inflows in 2025, driven by Europe, despite overall cautious investor sentiment and withdrawals from clean energy and tech funds.

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Funds Europe Funds Europe — 2025-11-10

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