Greenpeace on Tuesday criticised the European Central Bank for "bias" in its bond purchases that favour "carbon-intensive sectors" when the institution is looking for ways to address climate change.

According to a study by the environmental pressure group and the UK-based think-tank New Economics Foundation, 63 percent of bonds held by the ECB at the end of July were attached to fossil fuels, energy-intensive manufacturing, non-renewable utilities and carbon-intensive transport.

"The ECB needs a climate-friendly realignment," said Greenpeace economist Mauricio Vargas, arguing that the bank must set "the framework for a green European financial system".

As the bank tees up a wide-ranging strategy review, due to conclude next year, "the ECB now has the chance to listen and to correct its monetary-policy misstep," Vargas says.

The report recommended that the ECB stop buying bonds issued by fossil fuel and energy-intensive companies, and instead buy bonds from the green and renewable sectors as part of its multi-trillion-euro (dollar) asset-purchase programme.

"Its corporate purchases are structurally misaligned with EU commitments to the Paris Climate Agreement and do not adequately reflect climate-related financial risks," the authors said.

The study also argued that the Frankfurt-based institution needs to row back on market neutrality, the principle that guides asset purchases.

Intended to not favour one industry over another, the authors said it instead "hardwires a carbon bias" by in effect subsidising the companies' debt.

Sectors with a heavy carbon footprint such as energy companies and airlines have benefited from the ECB's bond-purchase policies, the study said.

Last week, ECB President Christine Lagarde said that the bank might revise its rules on neutrality in its strategy review.

Implementing these policies would be "in line with the climate emergency that we are currently facing but would also support climate-related financial stability objectives," the report said.

The move would also encourage more financial institutions to move away from business models that harmed the environment, it added.

The study comes ahead of a crunch monetary-policy meeting at the central bank next week.

The Paris climate pact, signed in 2015, commits nations to keep temperature rises below 2.0 degrees Celsius compared with pre-industrial levels by cutting their use of fossil fuels.

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