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Ammon News - Norway's $1.7 trillion wealth fund may have to divest shares of companies that violate the fund watchdog's new, tougher interpretation of ethics standards for businesses that aid Israel's operations in the occupied Palestinian territories.

The Council on Ethics for the world's largest sovereign wealth fund sent an Aug. 30 letter to the finance ministry, seen by Reuters, that summarises the recently expanded definition of unethical corporate behavior. The change has not previously been reported.

The letter did not specify how many nor name companies whose stocks might be sold but suggested it would be a small number, should the board of the central bank, which has the final say, follow recommendations that the council makes.

One company has already been identified for disinvestment under the new definition, it said.

"The Council on Ethics believes the ethical guidelines provide a basis for excluding a few more companies from the Government Pension Fund Global in addition to those already excluded," the watchdog wrote, giving the formal name for Norway's sovereign wealth fund.

The fund has been an international leader in the environmental, social and governance (ESG) investment field. It owns 1.5% of the world's listed shares across 8,800 companies, and its size carries influence.

Since the start of the war in Gaza in October, the fund's ethics watchdog has been investigating whether more companies fall outside its permitted investment guidelines. The letter said that the scope of exclusions was "expected to increase somewhat" under the new policy.

The fund held investments worth 16 billion crowns ($1.41 billion) in Israel as of June 30, across 77 companies, according to fund data, including companies involved in real estate, banks, energy and telecommunications. They represented 0.1% of the fund's overall investments.

Reuters