Newcastle's Council's decision to move its investments away from the fossil fuel industry has come under fire from both Labor and Liberal MPs in the Hunter region.

The council has supported a motion moved by Labor councillor Declan Clausen to invest, where possible, in stocks that are environmentally-friendly and also socially responsible.

It is a significant move for a city which is home to the world's largest coal export port and surrounded by the coal-rich Hunter Valley.

Labor MP for Hunter Joel Fitzgibbon described the move as 'astounding' and an 'over-reach on steroids'.

Liberal MP for Paterson Bob Baldwin said it is silly and sends a very poor signal to the industry Newcastle relies on.

"It's all about confidence," he said.

"This move by Newcastle Council undermines confidence and not just in the coal-face jobs in the mining industry but all those support industries that flow through the whole of our economy.

"It's silly, it's ideologically driven and bears no common-sense."

Mr Baldwin said it is the wrong message for council to be sending at a time when investment is needed.

"What this does, it sends a very bad sign to those wanting to invest.

"Those that need every ounce of confidence to invest in tight economic markets, when the council is not running with you, and running against you, it doesn't make sense, because what will they object to next?"