A third more climate-focused funds launched in 2022
As of the end of September there were 1,140 global investments with a climate focus.
Asset managers during the period, particularly in Europe, have focused product development on funds invested in companies better prepared for the transition to a low-carbon economy, Morningstar found.
Climate-conscious funds represented 37% of all climate fund launches, followed by climate-solutions funds (31%), and clean energy/tech funds (17%).
Assets in European climate funds dropped by 6.5% in the first nine months of the year to $303bn. In euro terms, however, European climate fund assets actually rose by 7.6% to €309bn from €287bn.
By comparison, global fund assets shrunk by 24% in dollar terms over the period.
It is a complex picture, however. In the US, assets in the most popular climate funds, namely clean energy/tech funds, experienced outflows of $43m in the first nine months of the year. This compares to $6.9bn of inflows over the same period in 2021.
Investors continued to exit from what they saw as these overvalued assets, said Morningstar, and favoured traditional energy companies amid record oil and gas prices instead.
Hortense Bioy, global director of sustainability research at Morningstar said the talks at COP27 about stepping up climate finance serve as a reminder of the role investors play in the transition to a low-carbon economy.
She said: “The scale of capital needed for the transition is significant. COP 27 will likely spark even more investor interest in addressing climate change in their portfolios, both to mitigate climate risk and to invest in climate solutions.
“With so many climate-aware fund options, understanding the range of strategies is an important first step in positioning portfolios to align with net-zero goals.”