While Norway has built much of its sovereign wealth through oil and gas development in the past-six percent of the fund is invested in fossil fuels-it's now home to a fast-growing solar power sector, with solar installations rising by 366 percent from 2015 to 2016.
The bank recommended the removal of oil stocks from the fund's benchmark index, which would still give it a little leeway to invest modestly in the sector.
The plan would entail the fund, which controls about 1.5% of global stocks, dumping as much as $40 billion of shares in worldwide giants such as Exxon Mobil Corp. and Royal Dutch Shell.
"Our advice is to simply remove the oil and gas sector, as it is defined in the FTSE reference index, from the fund's reference index", Matsen said.
"This advice is based exclusively on financial arguments and analyses of the government's total oil and gas exposure", the bank's deputy governor Egil Matsen said in a statement.
"There is a substantial difference.in return between the oil and gas sector and the broad stock market in periods when the oil price changes substantially".
Norway is a major oil producer, and it has plowed its energy earnings into the fund in order to fund pensions and other government expenses. The Stoxx Europe 600 Oil and Gas index reversed gains after the announcement, sliding 0.3% as of 3:47 p.m.in London.
Decision day arrives for same-sex marriage in Australia — Postal survey results
Barring any unforeseen mishap, the survey results will be published on by the ABS on 15 November 2017 . But they also include exemptions for religious organizations to refuse to hold same-sex weddings.
Oil and gas stocks would be replaced by investments in other companies.
In addition to its holdings via the fund, Norway has exposure to oil and gas via large untapped offshore hydrocarbon reserves, as well as its 67 per cent stake in the national oil company, Statoil.
"This is the biggest pile of money on the planet, most of it derived from oil-but that hasn't blinded its owners to the realities of the world we now inhabit", said McKibben. The finance ministry said it would study the plan and decide at the earliest in "autumn 2018".
"Oil price exposure of the government's wealth position can be reduced by not having the fund invested in oil and gas stocks", said Matsen.
"It is not surprising that we see the world's largest sovereign wealth fund managers no longer prepared to take the increasing risk associated with oil and gas assets, which do not have a long-term future", said Paul Fisher of the Cambridge Institute for Sustainability Leadership, in an interview with the Guardian.
The proposal to sell oil and gas stocks must be approved by the government.
And analysts warned that the central bank's proposal could have a knock-on effect on the sector.