A Shrinking Public Purse: How Impact Investors Can Close the Gap
It’s no secret: federal retreat from key social, environmental, care, and international development programs is accelerating. In 2025 alone, the current Administration has disrupted agency operations through widespread grant cancellations, mass layoffs, and frozen contracts. The recently passed One Big Beautiful Bill Act (OBBBA) codifies and accelerates many of these rollbacks.
While much attention has focused on how OBBBA reshapes the tax landscape for individuals and families, the bill also undermines federal investment in critical social and environmental programs and policies. We’re already seeing its impact: compressed timelines, phased-out tax credits, and new mandates that complicate — or outright block — funding directed toward public good, both at home and abroad.
Financial advisors are rightfully working overtime to guide clients through the bill’s tax and estate implications. At Humanize, we’re right there with them. But our responsibility doesn’t stop there. We’re also committed to informing our clients and community about the deeper implications of OBBBA for the impact investing sector.
As public funding recedes or is reallocated, key questions arise:
Can private capital step up to sustain and rebuild the financial infrastructure needed to advance equity, sustainability, and community well-being?
How do we direct capital to where it is most needed, both immediately and over the long term?
These are complex questions — and they won’t be answered overnight. But it’s essential that we start where we can, now. Morgan Simon recently wrote in ImpactAlpha:
“We can count down the days until the November 2026 mid-term elections in hopes Congress can clean up these messy laws before the ink fully dries. We can also embrace our agency as impact investors at this moment by stepping up as the third party in our social contract: the private sector.”
Let’s take a closer look at how key impact sectors are being affected, the gaps this creates, and the investible solutions that can — and must — rise in response.
1. The Ownership Economy
Sector goal: Build inclusive economic systems by expanding shared ownership and local control of assets.
Examples: Employee-owned businesses/democratic workplaces, community wealth building, cooperative business models
Federal rollback implications:
Reduced federal support for worker wealth-building and local economic development slows the momentum toward democratized ownership. Administrative disruptions limit grant and contract funding that often seed cooperative models and employee ownership transitions.
Investible solutions:
Impact funds focused on employee-led buyouts and worker ownership models that transfer business equity to frontline workers, particularly in underserved communities.
Investment vehicles supporting cooperative enterprises and community wealth-building initiatives that generate long-term, sustainable economic inclusion.
2. Environmental Conservation, Natural Capital, Biodiversity
Sector goal: Restore ecosystems and improve land health through ecologically aligned investment.
Examples: Regenerative agriculture, organic farming, sustainable forestry, reforestation, land stewardship by local communities and Indigenous peoples
Federal rollback implications:
Cuts to environmental grants and restructuring reduce funding for community-driven land stewardship and regenerative projects. Reduced support threatens the viability of investments that rely on blended finance models incorporating public funds and impact capital.
Investible solutions:
Funds specializing in regenerative agriculture and sustainable land management that partner with local and Indigenous communities.
Investment platforms that leverage private capital to scale natural capital projects focused on biodiversity restoration and sustainable resource use.
Early-stage venture investments supporting innovations in ecological farming and forest management aligned with impact goals.
3. Climate-Related Investing
Sector goal: Invest in solutions that mitigate and adapt to climate change, creating a more sustainable and resilient future.
Examples: Renewable energy projects (solar, wind, community power), energy efficiency initiatives for homes and businesses, climate resilience infrastructure (flood, fire, and drought protection)
Federal rollback implications:
The phasing out of key solar and wind tax credits (residential rooftop solar credits expiring in 2025 and utility-scale projects needing to begin service by 2027) compresses project timelines and reduces financial feasibility. Bonus depreciation now favors conventional over renewable energy projects. Abrupt termination of EPA and energy-related grants further restricts financing in clean energy zones. Direct-pay incentives persist but come with costly domestic content mandates that slow deployment.
The Greenhouse Gas Reduction Fund (GGRF) — a $27 billion EPA-administered federal program aiming to leverage private capital for clean energy in disadvantaged communities — has had its funding frozen despite prior allocation, threatening catalytic climate justice investments.
Investible solutions:
Community-based renewable energy projects that prioritize local ownership and operate with reduced reliance on subsidies, such as solar cooperatives serving underserved regions.
Energy efficiency funds focusing on retrofits and resilience upgrades in low-income and vulnerable communities.
Climate infrastructure investment vehicles with strong fundamentals positioned to capitalize on distressed clean energy firms affected by policy uncertainty.
4. Affordable & Sustainable Housing
Sector goal: Promote stable housing and equitable access to land.
Examples: Affordable housing development and preservation, community land trusts and shared equity models, green/sustainable housing development
Federal rollback implications:
Despite DOGE’s cuts to HUD and related administrative grants, the bill permanently increases Low-Income Housing Tax Credit (LIHTC) allocations and lowers bond thresholds, potentially enabling the creation of up to 1 million affordable units over the next decade. Mortgage interest deductions and temporarily raised SALT caps provide further, though time-limited, support. Administrative disruptions threaten pipeline continuity and local delivery capacity.
Investible solutions:
Impact funds focused on affordable housing development and preservation that capitalize on expanded LIHTC allocations.
Investment vehicles supporting community land trusts and shared equity homeownership models promoting long-term housing stability.
Funds integrating green building standards to deliver sustainable, cost-efficient affordable housing.
5. Community Lending & Financial Access
Sector goal: Expand access to capital for underserved people and places.
Examples: Microfinance for entrepreneurs and smallholder producers, Community Investment Notes (CINs), lending through Community Development Financial Institutions (CDFIs)
Federal rollback implications:
Administrative and budgetary pressures on CDFIs, alongside frozen international aid grants, reduce the flow of critical capital to underserved domestic and global communities, limiting equitable deployment of private investment.
Investible solutions:
Loan funds and community investment notes offered through impact platforms that provide fixed income opportunities by channeling capital to CDFIs and underserved borrowers.
Impact funds supporting microfinance institutions serving low-income smallholder producers and entrepreneurs.
Investment vehicles backing programs that improve financial inclusion and economic resilience in vulnerable communities domestically and abroad.
6. Gender Equity & Diversity
Goal: Support inclusive leadership, enterprise, and financial access.
Examples: Investing in or lending to women-led/BIPOC-led businesses, gender-focused or BIPOC-focused microfinance access to capital, programs supporting historically underserved populations
Federal rollback implications:
Federal retreat from social programs and grant funding undermines vital support systems for inclusive entrepreneurship and economic opportunity among marginalized groups.
Investible solutions:
Impact funds that prioritize investments in women-led and BIPOC-led enterprises with scalable business models.
Investment vehicles that facilitate access to capital for underserved founders via gender- and race-focused financing programs.
Funds supporting social enterprises that build economic resilience and leadership capacity in historically marginalized communities.
As public funding for critical social and environmental systems recedes, the need for values-aligned private capital has never been greater. From climate resilience to community ownership, there are real, investible solutions that not only generate financial returns but also advance equity, sustainability, and collective well-being.
If you’re navigating how to align your investments with your values in this shifting landscape, we’re here to help. Humanize Wealth can help you explore which opportunities best match your financial goals and the future you want build.