Oil helped Norway build up a $1 trillion fund. Now it's dumping oil stocks

London(CNN Business) Norway's huge sovereign wealth fund is dumping oil and gas stocks.

The Norwegian government announced Friday that the fund, which is worth about $1 trillion, will gradually phase out its investments in exploration and production companies including Chesapeake Energy (CHK) and China's CNOOC (CEO).

But it will continue to invest in oil companies that are developing big renewable energy businesses, such as BP (BP) and Shell (RDSA).

The goal of the divestment is to "reduce the vulnerability of our common wealth to a permanent oil price decline," Norwegian finance minister Siv Jensen said in a statement.

The fund has roughly 66 billion Norwegian krone ($7.5 billion) currently invested in energy exploration and production stocks. That's about 1.2% of the fund's stock holdings, a ministry spokesperson said.

Norway is a major oil producer, and it has plowed the proceeds of its energy wealth into the fund over the past two decades to fund pensions and other government expenses.

The government said the decision to divest was made for financial reasons and did not reflect its views on the price of oil or the sustainability of the petroleum sector.

However, it acknowledged that climate change is "an important risk factor" for the fund and said it would ask the fund's managers to review the way they manage climate risk.

More important than coal

Analysts said the move was an important landmark.

"Today's decision by the oil fund is even more impactful than when they divested from coal in 2015," said Mark Campanale, the CEO of Carbon Tracker, a think tank that studies the impact of climate change on investments.

"[It] shows that while the fund was initially built on revenue from oil and gas, the ministry of finance understands that the future belongs to those who transition away from fossil fuels," he added.

The fund's managers first floated the idea of divesting from oil and gas stocks in 2017 after the country's finances suffered a hit from the drop in oil prices.

An expert commission later recommended the fund should keep those investments.

Yet the announcement Friday means the fund will no longer invest in firms that are classified by index provider FTSE Russell as being energy "exploration and production companies." Norway's government initially released a list of 134 stocks that would be affected. But later in the day, it published a revised list that included 150 companies.

The government said it would continue to invest in petroleum activities on the Norwegian continental shelf, and had no plans to sell shares in national energy company Equinor (STOHF).

The country's finance minister said the fund would also continue investing in large integrated oil companies.

"It is anticipated that almost all of the growth in listed renewable energy over the next decade will be driven by companies that do not have renewable energy as their main business," Jensen said.

According to the fund's annual report, it has roughly $36 billion invested in the energy sector overall.

Stocks comprise roughly two-thirds of the fund's holdings. It owns shares in 9,000 companies, and its biggest investments are Microsoft (MSFT), Apple (AAPL) and Alphabet (GOOGL), the parent company of Google.

Just over 30% is invested in bonds and around 3% in unlisted real estate. The fund owns properties at prestigious addresses in cities including London, Paris and San Francisco.