JERUSALEM, Nov 9 (Reuters) - The Tel Aviv Stock Exchange (TASE) said on Monday it would launch a new index next month comprising Israel's largest companies but excluding those involved in the production chain of fossil fuels.

The new Fossil Fuel Free Climate Index will start trading on Dec. 6 and is expected to comprise 112 companies - all of which are in the benchmark TA-125 index - with a current total market value of 545 billion shekels ($162 billion).

A simulation by the TASE performed on Oct. 15 found that the new green index outperformed the TA-125 over the prior year with a yield of 12.15% versus 9.71%, and over five years with a yield of 221.6% versus 186.3%.

Similarly, the S&P 500's Fossil Fuel Free Index outperformed the S&P 500 over the past five years, TASE noted.

"The capital market can and should trigger environmental and social change that affects all of our lives as well as the future generations," said TASE chief executive Ittai Ben Zeev.

The bourse is joining the world’s leading exchanges, in "allowing investors and market players to take a moral stand in their investments, by offering a broader and more diversified range of products as part of TASE’s long-term strategy," he added.

TASE said a company engaged in the exploration, production, conveying, storage and refining of fossil fuels - gas, coal, petroleum, oil shale and their derivatives - would not be a part of the new index.

Companies engaged in the construction and operation of power plants that use fossil fuels to generate electricity and firms whose main objective is financing a fossil fuel entity and/or receiving royalties from a fossil fuel entity will also be excluded.

The new index will joining another green index launched by TASE on Sunday - the TA-Cleantech, which comprises shares of 12 renewable energy companies.

($1 = 3.3676 shekels) (Reporting by Steven Scheer; Editing by Mark Potter)