Transition Funds Fuel Record Climate Assets
Global assets in open-end funds and ETFs with a climate-related mandate reached a record $644 billion in June 2025, marking an 8.5% increase from the end of 2024, according to Morningstar data.
Regional Growth Trends
Europe remains the primary growth driver, holding 86% of these assets. Meanwhile, China and the US experienced more moderate gains during this period.
Climate Transition Funds Rise
In the first half of 2025, climate transition funds, which support companies moving toward a low-carbon economy, grew by 16% to $318 billion globally.
Green Bond Funds and Other Categories
- Green bond funds expanded by 14% to $44 billion, reaching similar levels as clean energy and technology funds.
- Clean energy and technology funds saw a 1.8% decline after years of weaker performance.
Investor Behavior and Market Dynamics
Investors continued to favor transition strategies despite broader outflows across climate funds. The overall climate fund category lost $13.8 billion in the first half of 2025, but transition funds attracted $2.5 billion in new investments.
Meanwhile, nearly $12 billion was withdrawn from climate solutions and clean energy or technology funds.
Morningstar stated, "Even with a rebound in green energy stocks, investor sentiment stayed cautious amid global economic, regulatory and geopolitical uncertainty."
Outlook for Transition Finance
Transition finance is seen as a crucial component of the UK’s green growth strategy. Passive funds tracking Paris-aligned benchmarks attracted $1 billion, indicating continued interest in climate-aligned investments.
Author’s summary: Climate transition funds are driving unprecedented growth in climate-related investments, with Europe leading and investor caution highlighted amid global uncertainties.