At its centre is $270 million worth of Newcastle ratepayer funds which, under a plan backed by the city’s Labor and Greens councillors, will change the way the money is invested and held in trust.

A plan spearheaded by Labor councillor Declan Clausen cleared its final hurdle on Tuesday night when a council majority voted in favour of pulling the council’s investment portfolio away from banks that invest in fossil fuel projects.

That includes all four of the AAA-rated major banks.

Federal Labor MP for Hunter Joel Fitzgibbon described the move by his ALP colleagues as ‘‘astounding’’ and ‘‘misguided’’.

‘‘Councils have to invest money wisely,’’ he said. ‘‘But it is amazing that a council with the largest coal port in the world would move to do all it can to undermine that industry.’’

Federal Industry and Science Minister Ian Macfarlane said  he ‘‘almost fell off my seat’’ when he heard the news.

‘‘I’m absolutely bewildered that the Labor Party is not prepared to step up for the coal industry, to step up for tens of thousands of people, many who are loyal to the Labor Party and pay union fees,’’ he said.

‘‘I’m amazed the council would step away from jobs in Newcastle and the Hunter Valley – the major provider of jobs in the Hunter is the coal industry, it is the base economy and contributes directly and indirectly to the region.’’

Hunter Business Chamber chief executive  Kristen Keegan said the move was ‘‘astonishing’’.

The move essentially means that, when renewing investments, the council’s financial boffins will need to give preference to investment funds that are ‘‘environmentally and socially responsible’’ when all other things are equal – that is, banks that don’t invest in the likes of greenhouse gas-emitting industry, habitat destruction, nuclear power or uranium mining.

Cr Clausen insisted the move would not spell huge changes to the way the council invested ratepayer money because strict guidelines already determined where it could  andcouldn’t go. He said that when the council had  two funds offering the same rate of interest, conditions and credit rating, it should simply choose the one with the best environmental record.

But it’s the message sent to the coal industry that has upset some quarters the most – a city council with the biggest coal port in the world and a multibillion coal industry in its own backyard saying it no longer likes the fossil fuel industry.

‘‘I don’t think that’s true,’’ Cr Clausen said. 

‘‘It sends a message that council is keen to diversify the local economy. I believe our coal industry definitely has a future, but there is a bigger future in renewables.’’

Labor lord mayor Nuatali Nelmes also said it was ‘‘about looking to the future’’.

‘‘It’s not about bagging the coal industry or cutting jobs or endangering existing industries,’’ she said. ‘‘It’s about putting our money where our mouth is and saying we support a diversified economy and we support the great hubs in Newcastle which are nurturing and manufacturing renewables.’’

With the exception of Labor councillor Tim Crakanthorp who was absent from Tuesday’s meeting, Cr Clausen’s move was backed by his Labor colleagues and the council’s two Greens.

Liberal councillor Brad Luke said the decision ‘‘punished people for supporting the biggest generator of employment in the Hunter’’.

But Greens councillor Therese Doyle said Newcastle had seen ‘‘very little social and economic benefit’’ from the coal industry and instead had to suffer from the health impacts of coal dust, noise and traffic disruption from coal trains.

‘‘The way of the future is away from coal,’’ she said.

NSW Minerals Council CEO Stephen Galilee said ‘‘the idea that demand for coal is on the decline is simply not supported by the facts’’.

‘‘Latest figures show that hunger for NSW coal is growing with exports out of Newcastle rising by 3.1 per cent in the last financial year,’’ he said.

Ms Keegan said  that ‘‘to say that the coal industry is a thing of the past is extremely naive and disappointing to the many thousands of businesses and workers across the entire region’’.

‘‘Those comments should be treated with the disdain they deserve,’’ she said.

‘‘The social and economic benefits of the coal industry are enormous and it is astonishing that the elected representatives who take this view are so disconnected from the very working people they represent.”

Mr Macfarlane said he would have thought Labor would stand up for coal miners.

‘‘It’s abandoning its base and is more interested in standing with the Greens than standing up for the coal industry,’’ he said. ‘‘If I was working as a coal miner I’d be saying, ‘Who is standing up for our jobs?’

‘‘The Coalition is trying to stand up for the industry and get it expanded.’’

The council’s general manager, Ken Gouldthorp, said he could not comment on the decision but he told Tuesday night’s council meeting the move appeared ‘‘vague’’ and ‘‘lacked clarity’’.

Representatives from the Labor-backed mining union (CFMEU) which represents many thousands of Hunter Valley coal workers, were unable to be reached for comment.