Jesper Berg, the head of the Danish Financial Supervisory Authority, says pension funds looking for greener investment options risk a run-in with the regulator if they sacrifice returns. The rules, as they stand now, require that funds always target the best possible return for their customers, he says.

In an interview in Copenhagen, Berg said that “as long as they believe they can raise [green] investments without lowering returns, fine.” If funds want to make a point of prioritizing ethical investments over returns, then they need to wait for lawmakers to step in, he said.

The reality check from the regulator comes as Danish pension funds take coordinated action to address climate change through their investment targets. The goal, which builds on the Paris Accord, means most funds in Denmark’s EUR 440 billion pension industry are shunning companies that don’t live up to specific climate goals.

While some research has shown that green investments are at least as profitable as those that don’t take the environment into consideration, the findings aren’t conclusive.