China overtook the United States to become the second-biggest climate funds market in the world last year, as the global market for sustainable investing continues to develop. China’s rise comes off the back of favorable conditions for environmental, social and governance (ESG) investing, reports the South China Morning Post. Assets in the Chinese climate funds market grew by 149% from 2020 to $46.7 billion last year. The US, bumped into third place after Europe and China in market size, saw assets totaling $31 billion, achieving 45% growth since 2020. Climate funds markets in the rest of the world also doubled to $6.3 billion at the end of last year.
“The rapid expansion of China’s climate funds market can be mostly attributed to the heightened focus on climate change and other environmental issues in the ruling party’s agenda for economic transformation,” said Hortense Bioy, global director of sustainability research at Morningstar.
Clean energy and technology funds formed a lion’s share of the Chinese climate funds market last year, taking up more than 60% of annual inflows. Climate solutions funds followed at 35%, while low carbon and climate conscious strategies remained less popular.