(Adds detail, quotes)
OSLO, Dec 3 (Reuters) - Norway's $870 billion wealth fund is not an effective tool to fight climate change, a government commission said on Wednesday, rebuffing opposition calls that it should be forced to sell out of all coal investments.
The fund, which holds stakes in around 8,000 companies on all continents, should instead strengthen its active ownership, putting more weight on climate change and sell out of the worst offenders, the commission said in a statement.
The fund, the world's biggest sovereign wealth fund, owns more than 1 percent of all global shares and many other long-term investors take their cue from its decisions.
"We believe the use of the fund as a climate policy instrument beyond what is compatible with its role as a financial investor would be both inappropriate and ineffective," the commission said.
"Opening the door for such alternative objectives for the fund would represent a break with the underlying premise that the fund is not to become a 'second government budget' ... where policy ambitions that do not make it through Parliament's ordinary budgetary prioritisation are addressed."
The government asked the commission earlier this year to review its investments in coal and fossil fuels after opposition parties, who hold a majority in parliament, threatened to pass legislation, forcing it to quit the coal sector.
The fund already excludes companies on ethical grounds and does not invest in tobacco companies, nuclear weapons makers and some miners that it accuses of causing environmental damage.
These exclusions are handled by the fund's ethics council and the commission said this same council should expand its work to give climate change a higher consideration.
"This would allow for exclusion of companies on a case-by-case basis where there is an unacceptable risk that the company contributes to or is responsible for acts or omissions that, on an aggregate company level, are severely harmful to the climate," it said.
"We do not think climate issues can effectively be addressed through automatically excluding all coal or petroleum producers from the Fund," it said. (Reporting by Joachim Dagaenborg; Writing by Balazs Koranyi, editing by William Hardy)