The move would also mean raising its investments in other sectors.
In September, the fund value reached $1 trillion for the first time after being boosted as the world's major currencies strengthened against the USA dollar, combined with strong equity markets.
"It clearly stands out, perhaps not surprisingly, but not obviously, that indeed 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", Matsen said. It also has shares worth more than $1bn in oil services firm Schlumberger and Italy's Eni, whose share price slumped 0.86%.
McKibben compared the bank's recommendation to "the moment when the Rockefellers divested the world's oldest oil fortune" in 2014, when the heirs to Standard Oil said that if founder John D. Rockefeller were alive in the 21st century, "he would be moving out of fossil fuels and investing in clean, renewable energy". It invests Norway's revenues from oil and gas production for future generations in stocks, bonds and real estate overseas. According to Norges Bank, their analysis of the oil price risk in Norway's overall wealth fund risk was based on future oil and gas revenues, and its direct holdings in Statoil and the GPFG.
"Oil price exposure of the government's wealth position can be reduced by not having the fund invested in oil and gas stocks".
"That would mean buying more stocks in the oil and gas sector", said Matsen.
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.
Norway's trillion-dollar sovereign wealth fund is proposing to sell off all its holdings in oil and gas companies.
"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".
On Thursday, Storebrand said in a release that Norge Bank's move should encourage other funds to pressure "oil and gas companies to revisit their investment plans and operations in the transition to a low carbon economy". The sector accounts for 14 percent of Norway's gross domestic product (GDP).
Norwegian Minister of Finance Siv Jensen said the issues raised by Norges Bank "are complex and multifaceted" and its advice requires a thorough assessment.
At the earliest, the ministry's first opportunity could come in the spring, with a vote in parliament in June.