"For a long time, Caterpillar has supplied bulldozers and other equipment that has been used to demolish Palestinian homes and infrastructure to clear the way for Israeli settlements," Kiran Aziz, head of responsible investments at KLP, said in a statement.

"It has also been alleged that the company's equipment is being used by the Israeli army in connection with its military campaign in Gaza," she added.

Because of this, there is a "risk that the US company may be contributing to human rights abuses and violation of international law in the West Bank and Gaza," KLP said.

The fund said that since Caterpillar "cannot provide us with assurances that it is doing anything in this regard, we have decided to exclude the company from investment."

KLP -- not to be confused with Norway's massive sovereign wealth fund -- said that earlier this month it owned Caterpillar stock valued at 728 million kroner ($68.6 million), which it had now divested.

The fund has around $90 billion under management.

In April 2021, KLP excluded companies linked to Israeli settlements in the occupied West Bank, including telecom equipment giant Motorola.