Sustainable Finance

Motivation

The public sector avails of significant purchasing power when contracting with the private sector for goods, works and services. This provides it with meaningful leverage across a good fraction of economic activity. Significant efforts are underway worldwide to utilize this leverage towards achieving sustainability goals. Yet implementing sustainable procurement at scale remains a task of enormous complexity that requires significant investment: in developing suitable policies, establishing appropriate information flows and methodologies and, not least, embedding these new practices and behaviors across swathes of economic activity.

In this blog post we provide a brief overview of how an important class of economic analysis tools termed EEIO, or environmentally extended input-output frameworks, can be utilized to support the implementation of key public procurement sustainability objectives. We sketch the nature of these tools, how they can be used to provide relevant information, and the pros and cons of such an approach.

What are the UN Open Source Principles?

The UN Open Source Principles is a set of eight high-level guiding principles that were recently adopted by the UN Chief Executive Board’s Digital Technology Network (DTN). They open a new window and provide guidelines to drive collaboration and Open Source adoption within the UN and globally. They send a strong signal of the importance of open source and how individuals and organisations need to act to benefit but also support a thriving and sustainable open source community.

How to Random Walk on Supply and Use Tables (and why bother?)

Presentation given at the 16th Input-Output Workshop, March 27st 2025, Groningen, Netherlands.

We discuss how Supply and Use tables can be mapped naturally into Bipartite Graph Networks (in various Open and Closed economy configurations).

Summary

We imagine the random propagation of money flows through simplified economic networks as a sequence of monetary transactions following a stochastic process. We follow the journey of a cash amount. Whenever a transaction in this chain implies an environmental impact, that impact is recorded and cumulated. Computing the expected outcome of such flows reproduces the standard results of environmentally extended input-output models. The random walk interpretation allows the computation of various additional statistical properties, one example being estimating a variance of environmental impact or intrinsic uncertainty around the central estimate. We interpret this uncertainty as being a concentration risk measure.

Open Risk White Paper 16: Follow the Money: Random Walks on Supply and Use Graphs

We explore how to organize Environmentally-Extended Input-Output frameworks (EEIO), and in particular their Supply and Use Table (SUT) formulation, as graphs. Working directly with SUT systems instead of converting to symmetric IO matrices involves fewer assumptions and (in principle) higher resolution in expressing environmental impacts. We elaborate first on the representation of SUT tables as directed, weighted bipartite graphs. We discuss both closed (circular) and open system configurations, featuring source and sink nodes. These are modeled as regular and absorbing Markov Chains respectively. We outline a probabilistic random walk framework that realizes mathematically the colloquial Follow the Money concept. This enables computing a range of various existing and new metrics using the EEIO data. As an illustration, besides the standard environmental footprint metric, we introduce the concept of footprint variance or the intrinsic variability of estimates. We illustrate the overall setup using a classic numerical example from the EEIO literature.

Expanding on the popular Input-Output Models with Python course

The SFI32064 course is a DeepDive with nine segments, exploring Input-Output models using Python and the Pymrio library. The following is an updated overview of it contents.

EEIO in Sustainable Finance: Challenges and Opportunities

Presentation given at the 15th I-O Workshop, March 1st 2024, Osnabrueck, Germany

We discuss the overlap of EEIO tools with Sustainable Finance applications. In particular their potential role in Portfolio Management.

Who Needs a New Financial Services Taxonomy?

Our age is increasingly dominated by the dual challenges and opportunities of the sustainability transition on the one hand, and digital transformation on the other. We witness emerging new financial domains with novel names such as Fintech , or TechFin, or various combinations and hues of Green and Sustainable in Sustainable Finance and we see forces that are reshaping the direction of travel for the financial industry.

An Awesome List for Sustainable Finance.

A curated list of sustainable finance resources. The focus of the list is on code (tools, libraries, frameworks etc.) that fairly directly support any type of sustainable finance effort and open data that are useful in a sustainable finance context.

The Climate Dictionary is an initiative of the United Nations Development Programme (UNDP) aimed at providing people worldwide with a simplified guide to understand climate change. The Dictionary (first published Aug 2023) seeks to bridge the gap between complex scientific jargon such as present in the IPCC publications and other scientific bodies and the public.

June 21 2023 marks the sixth annual #ShowYourStripes Day - a time when meteorologists and other climate communicators around the world raise awareness of our warming planet by displaying colorful visuals of climate change. The warming stripe graphics are representations of the change in temperature over the past 100+ years (here we use the global average). Each stripe represents the temperature averaged over a year. The stripes typically start around the year 1900 and finish in 2022.

GHG Accounting offers a means of measuring the direct and indirect emissions to the Earth’s Biosphere of CO2 and its equivalent gases from industrial and other activities. GHG Accounting is a rapidly developing area that has come to receive increased focus in the context of accelerating Climate Change. Given that the generation of electricity and heat accounts for around a third of global GHG emissions electricity consumers have incentives to proactively reduce those emissions by reducing electricity demand, or by shifting energy supply by procuring alternative lower-carbon or renewable resources.

Open Risk White Paper 14: Integrated energy accounting using relational databases

In this Open Risk White Paper we demonstrate a concrete implementation of an integrated energy accounting framework using relational database technologies. The framework enables accounting of non-financial disclosures (such as the physical and embodied energy footprints of economic transactions) while enforcing the familiar double-entry balance constraints used to produce conventional (monetary) accounts and financial statements. In addition, it allows enforcing constraints associated with the flow and transformations of energy that can happen inside the organizational perimeter.

Integrated Energy Accounting is keeping track and reporting on an entity’s detailed energy footprint (primary inputs, transformations and waste generation) not as an addendum to financial accounting and reporting but as a deeply-linked extension that is subject to the same level of rigor.

Open Risk White Paper 12: Deep-Linking Financial and Energy Accounting

We develop a conceptual framework for integrated accounting that produces (where possible) non-financial disclosures subject to the same double-entry balance constraints as those used to produce conventional financial statements and automatically ensures any additional conservation laws are satisfied. We identify the key ingredients required for such a rigorous integrated accounting framework, in terms of concepts, postulates and design choices. Our focus and concrete use case is built around energy accounting, keeping track on an entity’s detailed energy footprint (primary inputs, transformations and waste generation) as an extension of its standard financial accounting and reporting. The central tool is the use of multidimensional double-entry bookkeeping which tracks quantitative information characterizing economic objects beyond their monetary values. This choice ensures the enforcement of both classic balance constraints and any applicable energy conservation laws. Further tools and techniques concern the aggregation and reporting of dual (monetary and physical) dimensions of an entity’s accounting state. The framework is documented using mathematical notation.

Introduction

In this fourth and final installment we will discuss how the data framework we have developed thus far can be mapped into classic portfolio management concepts and categories, and thus, how one can articulate the concept of sustainable procurement management on a portfolio basis. The concepts and analytic methodologies of financial portfolio management¹ can significantly enhance the toolkit available to practitioners and, in sense, connects the domain of Green Public Procurement to other ongoing initiatives in broader Sustainable Finance.

Introduction

This is the third in a series of posts where we explore the role of Open Data and Open Source in enabling and accelerating the broad based effort towards Green Public Procurement (GPP). In this third installment we will link procurement entities to private sector sellers and, through the sectoral profile of the procurement contract, (CPV category) we will infer the amount of CO2 emissions that can be attributed to these activities.

Introduction

This is the second in a series of posts where we explore the role of Open Data and Open Source in enabling and accelerating the broad based effort towards Green Public Procurement (GPP).

Introduction

In a series of posts we will explore the role of Open Data and Open Source in enabling and accelerating the broad based effort towards Green Public Procurement (GPP). There are several important (and possibly obscure) terms in this sentence, so our first order of business will be to unpack them.

What is the EU Datathon?

The EU Datathon is an annual Open Data competition organised by the Publications Office of the European Union since 2017. The competitions are organised to create new value for citizens through innovation and promoting the use of open data, in particular the datasets available on the official portal for European data.