OSLO, June 26 (Reuters) - Norway's largest pension fund

KLP said on Wednesday it will no longer invest in Caterpillar

Inc ( CAT ) because of risk that equipment sold by the U.S.

group to Israel is used to demolish Palestinian homes and

infrastructure, including in the Gaza war.

The maker of bulldozers and other heavy machinery may be

contributing to human rights abuses and to the violation of

international law in Gaza and the West Bank, and has thus been

excluded from the portfolio, KLP said.

The fund manager held shares in Caterpillar ( CAT ) worth 728

million Norwegian crowns ($69 million) prior to a June 17

decision to divest its stake.

While KLP had engaged in a dialogue with Caterpillar ( CAT ) over

several months, it did not receive satisfactory assurances that

the company was able to reduce the risk of violating the rights

of individuals, the asset manager said.

Israel's ground and air campaign in Gaza was triggered when

Hamas-led militants stormed into southern Israel on Oct. 7,

killing around 1,200 people and seizing more than 250 hostages,

according to Israeli tallies.

The Israeli offensive in retaliation has so far killed

37,658 people, the Gaza health ministry said on Tuesday.

KLP in 2021 excluded 16 Israeli, European and U.S. companies

from its portfolio because of their links to Israeli settlements

in the occupied West Bank.

Along with a number of other countries, Norway considers the

settlements a breach of international law. Israel disputes this

and cites Biblical and historical ties to the land, as well as

security needs.

($1 = 10.5538 Norwegian crowns)