The trade body for Denmark’s insurance and pensions industry has welcomed signs that the government will enable its members to own and operate forestry assets through subsidiaries.

Denmark has drafted legislation that would allow pension funds and other financial entities to own ancillary businesses, but the country’s implementation of EU insurance regulations could lead to forestry businesses being effectively excluded.

Insurance and Pensions Denmark (IPD) welcomed an announcement by Simon Kollerup, Minister for Industry, Business and Financial Affairs, that he would strive to ensure this did not happen by seeking more clarity from the EU.

Those pushing to allow Danish institutions to invest in forestry point to the fact that their Swedish counterparts are already permitted to do so despite also being subject to EU insurance regulations.

In a written response to a parliamentary committee question, Kollerup said earlier this month that, in the light of the different interpretations of EU insurance rules in neighbouring countries, the ministry would ask the European Commission for a concrete assessment about the matter.

“If the EU Commission assesses that the EU rules allow insurance companies to own and operate forestry in a subsidiary company, I will take steps to reflect that interpretation in Danish law,” he said.

Jan Hansen, deputy director of IPD, said: “We certainly understand that the government wants to ensure that the companies’ opportunities to invest in and manage forests are in accordance with EU rules.”

He said there was “great interest” among several Danish insurance and pension companies to make long-term investments in forestry, to ensure both good returns with low risk as well as to contribute to the green transition.

“We are pleased that the minister and the parliamentary parties so clearly state that they want to make it possible,” Hansen said.

IPD said a broad majority of parliamentary parties had sent “a clear political signal” that pensions and insurance firms should be able to own and operate forests, adding that the organisation was now waiting for the Danish authorities to ensure this was possible within the EU framework.

According to the Danish Ministry for Industry, Business and Financial Affairs, in article 18 of the EU’s Solvency II directive, it is stated that insurance companies must limit their purpose to insurance business and directly related business, excluding of any other commercial activity.

Most of Denmark’s pension providers are incorporated as life insurance companies and come under the scope of Solvency II.

However in Sweden, Kollerup said, such providers are permitted to own and operate forestry business via a subsidiary.

Sweden’s second-largest pension fund AMF announced in November that it was increasing its stake in pulp and paper manufacturer BillerudKorsnäs to become its largest shareholder, with its head of equities saying the sustainable packaging materials producer had good conditions to grow and develop further, not least through its role in the global transition.