Financially integrating ESG can improve overseas investment projects

For many Chinese companies going overseas, their strategy is tested during project execution. Across energy, mining, infrastructure, and advanced industries, global strategies are being delivered through large capital projects and complex supply-chain implementation: power plants, mines, EV factories, logistics networks, contractors, and supplier ecosystems — often in jurisdictions with unfamiliar regulatory, labour, environmental, and community conditions.

In this environment, execution speed is a strategic variable — delays do not simply increase costs; they reshape outcomes.

The scale and complexity of overseas deployment

Recent data highlights the scale of investment at stake. In 2025 alone, Chinese companies committed over USD 200 billion to overseas construction and investment, with average deal sizes approaching USD 1 billion. Since 2013, cumulative overseas investment has reached approximately USD 1.4 trillion, concentrated in energy, mining, manufacturing, and infrastructure — sectors that are capital-intensive, highly regulated, and operationally complex.[1]

As projects increase across a wide range of geographies, execution conditions become more diverse. Permitting processes, labour conditions, safety standards, community expectations, and regulatory enforcement vary significantly from market to market. In this context, execution risk is no longer an exception — it is a defining feature of global expansion that needs to be managed effectively.

The limits of current ESG practices

Most companies going overseas already invest significantly in ESG-related practices. Environmental and social impact assessments, regulatory compliance programmes, supplier audits, safety systems, and sustainability reporting provide essential visibility and control. These practices generate valuable insights and help organisations meet regulatory expectations.

However, this approach is designed to meet compliance thresholds, not execution outcomes.

In many cases, the assumption is that if regulatory requirements are met, projects will proceed largely as planned. While compliance is necessary, experience shows it is not always sufficient to ensure timely execution. Projects that are technically compliant can still face delays due to labour disputes, safety incidents, community opposition, enforcement actions, or supply-chain disruptions.

The challenge is not the quality of existing ESG data, but how it is used. When ESG information remains detached from financial decision-making, it is difficult for companies to understand which risks truly threaten execution — and where intervention creates the greatest value.

Moving from compliance to execution insight

ESG should be understood as a set of execution-critical risk factors embedded in projects and supply chains. Labour conditions, safety management, environmental permitting, and community engagement influence the probability of disruption and delay, and therefore the speed at which strategy is delivered.

Importantly, much of the required data should already exist — in audits, assessments, monitoring systems, and supplier data. The opportunity lies in integrating this information into financial and operational decision-making.

When ESG risks are quantified and translated into financial metrics — such as expected delays, cash-flow impact, and risk-adjusted returns — they become directly relevant to capital allocation, sequencing decisions, and prioritisation.

Enabling decision-grade conversations

Financial integration allows leadership teams to address practical questions that compliance-based approaches alone struggle to answer:

• Where are execution delays most likely to occur?
• Which ESG interventions materially reduce disruption risk?
• Where does ESG investment protect timelines, cash flows, and enterprise value?
• Which risks can be tolerated, and which threaten strategic delivery?

Seen this way, ESG does not replace existing practices. It builds on them — using existing data to support clearer, more disciplined decisions about execution risk.

For companies going overseas, the ability to model risk probability and its financial consequences is a source of competitive advantage.

It enables material ESG risks to be managed with the same discipline as cost, schedule, and capital efficiency. It supports faster, more confident decision-making. And it helps organisations move from reactive issue management to proactive control that enables them to keep their projects and strategy on track.

What this means for Chinese companies going overseas

• Treat execution risk as a strategic variable. As overseas projects grow in size and complexity, delays and disruption increasingly shape financial outcomes. Execution risk should be considered alongside cost, schedule, and capital efficiency in strategic decisions.
• Build on existing ESG compliance data. Environmental, labour, safety, and supply-chain data already collected can be leveraged more effectively by linking it to execution and financial impact.
• Integrate ESG insights into financial decision-making. Translating ESG risks into financial metrics helps prioritise interventions that protect timelines and value.
• Focus ESG action where it protects delivery. Not all risks require the same level of mitigation. A financially integrated approach helps distinguish between acceptable risk and risks that threaten strategy execution.
• Use ESG to support predictable global expansion. When managed with the same discipline as cost and schedule, ESG can help reduce uncertainty and support overseas growth.

[1] Nedopil, Christoph (January 2026): China Belt and Road Initiative (BRI) Investment Report 2025, Griffith Asia Institute and Green Finance & Development Center, FISF, Brisbane