In a rare alignment, Mr Abbott found himself on the same page as several Labor MPs and the peak mining union in heavily criticising the move by Newcastle's Labor and Greens councillors.

"Why is a coal city saying 'no' to coal investment," Mr Abbott, pictured, said.

"And why is the Labor party saying 'no' to coal jobs?"

Federal Opposition leader Bill Shorten refused to be drawn on the move which has some within his own party at loggerheads, and also at odds with his party's union allies.

The Prime Minister's comments came as Labor councillor Declan Clausen moved to clarify his controversial move, adding that it was not about destroying coal jobs, but supporting and growing those in burgeoning renewable industries.

"The new investment policy introduces a third tier of criteria which, when rates of return and credit ratings are equal, will see council invest preferentially in banks that have strong environmentally and socially responsible credentials," he said.

"The coal industry has played an important role in the regional economy for more than a century, and will continue to play a strong role for many decades to come.

"Council's decision will continue to support this industry, while also supporting increased diversity in the local economy, ensuring that council's funds are directed towards socially responsible investments such as the provision of aged care and affordable housing, and away from socially irresponsible investments such as those that destruct habitat, produce pollutants or support the tobacco and gambling industry."

His Labor colleague, Newcastle state MP Tim Crakanthorp, was absent from Tuesday's council meeting and didn't respond to questions on Thursday about whether or not he would have backed Cr Clausen's move.

Instead, his office issued a statement saying "coal will continue to be of great importance to the Hunter, particularly for employment".

"I would like to see Newcastle broaden to be the energy capital of Australia building on the work of the CSIRO Energy Centre and the Newcastle Institute for Energy and Resources to create more jobs now and into the future," the statement said.

He was at odds with the regional boss of the CFMEU Peter Jordan, though, who joined the plan's critics, which also include Labor's federal MP for Hunter Joel Fitzgibbon and Liberal MP for Paterson Bob Baldwin.

"This is a bizarre move from Labor councillors in an area which has been so dependent on coal for so long," Mr Jordan said.

"Frankly the council should be making decisions about investing ratepayers' money based on the best services and financial return they can get for residents, not to pursue their own personal hobby horses."

Greens leader Richard Di Natale applauded the council's move, saying the coal industry was in decline, despite industry leaders saying it was not.

"Australia's future is not in coal and Newcastle has shown that very, very clearly by saying 'we are no longer in the coal business despite the fact that we are a town that has at least in part been built on the back of the coal industry'," he said. "We do need to move into the 21st century and Newcastle has shown how to do that by taking a very brave and important step in the campaign to transform our economy."