Global Capital Pressures vs. Local Content Mandates: Assessing the Tension Between ESG Investment Standards and National Economic Priorities in Developing Economy Energy Value Chains

• Abi cit

  Lautech

  Author

The accelerating global energy transition has created a fundamental tension between international ESG (Environmental, Social, and Governance) investment standards and the local content mandates that developing economies employ to capture domestic value from energy projects. This study investigates how this tension manifests across energy value chains in developing economies, drawing on institutional theory and stakeholder theory to analyze the competing pressures facing multinational enterprises. Employing a mixed-method research design combining quantitative analysis of 144 oil and gas firms operating in Nigeria with comparative case analysis of institutional frameworks across Southeast Asian economies , the study reveals that coercive and normative pressures significantly shape sustainability practices (p < 0.01), while mimetic pressures show no statistically significant effect. Key findings indicate that institutional pressures affect firms uniformly regardless of size, with compliance costs averaging 12.4% of project capital for full ESG alignment versus 8.7% for LCR compliance alone, creating a 3.7% "tension premium" that constrains investment viability. The study proposes a weighted institutional alignment framework that reconciles these competing demands through a 3-tier compliance hierarchy, achieving 89.4% predictive accuracy in identifying viable project structures. These findings have significant implications for policymakers designing LCR frameworks that attract international investment while advancing national development priorities, and for corporate practitioners navigating ESG compliance in resource-constrained environments.

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