The wealth fund in Norway may divest from companies that aid Israeli regime in its genocidal war against the Palestinians in the besieged Gaza Strip.

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, Reuters reported on Wednesday.

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.

According to the Reuters report, among the companies that the watchdog could be looking at are RTX Corp (RTX.N), opens new tab, General Electric (GE.N), opens new tab and General Dynamics (GD.N), opens new tab. According to nongovernmental organisations, they make weapons used by Israel in Gaza, where its military offensive has killed nearly 41,000 Palestinians. The companies did not immediately reply to requests for comment.

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.