By: Fran Seegull
Originally Published In ImpactAlpha’s Policy Corner On December 21, 2025.
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Advocates for a more sustainable, equitable U.S. economy faced an uphill battle in 2025. This was a year defined by a uniquely challenging environment, with market instability and uncertainty, growing unemployment across certain sectors and significant backsliding on recent public policies that would have laid the groundwork for greater economic opportunities in communities and a more transparent and accountable financial system overall.
There were some bright spots, however, as impact investing advocates secured important wins for community investing in the tax reform discussion and helped fend off existential threats to foundational agencies like the CDFI Fund.
Read on to learn more about some of the most pressing developments this year, from community investing policies to investor rights and more, that will shape impact investing in 2026.
Bipartisan community investing is tested but ultimately prevails
1. Threats to the CDFI Fund. Community development financial institutions (CDFIs), community lenders long heralded as a bipartisan priority, became a lightning rod in 2025. There were multiple attempts to dismantle the Treasury Department’s CDFI Fund, including a March Executive Order, an October Reduction in Force order and multiple attempts by the Office of Management and Budget (OMB) to withhold funds.
Bipartisan support for CDFIs in Congress endured, bolstered by strong advocacy from the industry and allies. The CDFI Fund continues to operate going into 2026.
Most notably, over 100 Republican Members of Congress wrote to Treasury and OMB demanding the reversal of the October Reduction in Force order, which ultimately was reversed with the end of the government shutdown.
2. Repeal of CRA modernization. The Community Reinvestment Act (CRA), long considered a cornerstone of fair community-based lending, received a major setback when regulators rolled back modernization rules that would have expanded access to credit in underserved communities. CRA is now being enforced under the 1995 rule, which is severely out of date in the modern banking environment.
Additionally, a predicted $6.6 trillion of stablecoin deposits (digital assets that can represent virtually any national currency) coming in the wake of the implementation of the GENIUS Act could lead to reduced hard currency deposits and investment in community banks as new customers may bypass the traditional finance sector.
Nonbank stablecoin issuers do not have community reinvestment obligations, and local community finance institutions that serve low- and moderate-income (LMI) communities may face significantly reduced funding for local lending efforts.
Read more from ImpactAlpha’s coverage this year:
“Community lenders muster bipartisan support to salvage gains for low-income communities,” Oct. 26, 2025
3. Tax reform wins for community investing programs. The 2025 reconciliation bill made Opportunity Zones (OZ) a permanent feature of the U.S. tax code and implemented improvements to the program, including transparency and reporting requirements, tightened eligibility for communities to be designated as zones and an increased focus on rural OZs.
The law also made permanent the New Markets Tax Credit (NMTC) program and the Low-Income Housing Tax Credit (LIHTC) program, which have incentivized billions of dollars of investment in housing and operating businesses in low-income communities.
Read more from ImpactAlpha’s coverage this year:
“Investors look for Opportunity Zones to get an extension and a fresh dose of tax-advantaged capital,” Jan. 22, 2025
The freedom to invest is under attack
4. Amplified politicization of DEI and ESG. A January Executive Orderaimed to eliminate DEI programs across federal agencies, even going as far as to encourage the elimination of DEI programs in the private sector as well. The Administration has wielded this order as a tool to unilaterally cut programs and scare the private sector into pre-emptive compliance.
While these are major setbacks ushered in by powerful forces, there is growing mobilization to push back against anti-DEI and anti-ESG efforts. Grassroots organizing, including a growing counter-effort from traditional center-right groups have blunted state level legislation across the country. And developments like the Fearless Fund lawsuit and the Costco “buycott” have propelled a groundswell of support for pro-DEI and pro-ESG organizing.
Read more from ImpactAlpha’s coverage this year:
“Now is the time for foundations to wield their shareholder power,” Oct. 22, 2025
“Hidden champions: The case for selective hushing,” April 28, 2025
“Raising impact funds that can weather attacks on DEI,” March 25, 2025
“Public companies respond to the backlash against climate and diversity initiatives with surrender and defiance,” January 6, 2025
5. SEC scrutiny of shareholder engagement and proxy advisors. The SEC released new guidance on how to adjudicate which shareholder proposals will be allowed on proxy statements. The new process makes it significantly easier for companies to exclude shareholder proposals, as the SEC will no longer issue “no action letters.” Chair Atkins has also previewed more extensive action to come on shareholder proposals as well as regulation of proxy advisors.
Political and cultural pressure have also reduced institutional interest in supporting ESG-related proposals, and efforts to make those harder to file or support will only grow.
Read more from ImpactAlpha’s coverage this year:
The United States is backsliding on climate policies
6. Landmark clean energy policies walked back. The Trump Administration remains locked in legal battles as it seeks to cancel the Greenhouse Gas Reduction Fund (GGRF) program, focused on providing clean energy solutions to low-income communities. Currently, the program and its funds remain frozen, but appeals led by Climate United and other GGRF participants continue.
While there are private efforts to replace some of this financing, it is difficult to overstate the impact on the quest for community resilience if the $27 billion in GGRF funds are completely rescinded.
Read more from ImpactAlpha’s coverage this year:
“Courts uphold GGRF freeze + the largest employee ownership deal yet,” September 5, 2025
“Green lenders scramble to salvage deals as appeals court OKs freeze on accounts,” September 2, 2025
“How local governments are financing climate action without federal funding,” August 13, 2025
7. Repeal of IRA tax credits. Republicans in Congress repealed many of the clean energy tax incentives within the Inflation Reduction Act (IRA) in the final budget reconciliation package. In addition to phasing out most consumer clean energy tax credits (for vehicles, home improvements, etc.), tax programs to support clean energy generation were significantly restricted and slated for phaseout. For instance, new projects to produce wind and solar energy that begin construction after July 2026 will need to be completed and placed in service on a much tighter timeline.
The IRS and the OMB have also continued to push for regulatory and process changes that will limit the scope of eligible projects, further accelerate funding and construction timelines, and restrict certain foreign investors from participating in the programs.
Read more from ImpactAlpha’s coverage this year:
“The ugly details of the Big Beautiful Bill’s damage to US clean energy competitiveness,” June 4, 2025
“Republican budget proposals take an ax to US clean energy incentives,” May 13, 2025
8. Corporate transparency on climate risk in question. The SEC has declined to continue to defend the corporate climate disclosure rule finalized in 2024, which is currently stayed pending ongoing litigation in the Eighth Circuit. However, the SEC does not currently intend to go forward with repealing the rule.
While the state of California made progress toward mandated corporate climate disclosures, those news laws (SB261 and SB253) are facing their own legal challenges.
Read more from ImpactAlpha’s coverage this year:
“Outside the US, institutional investors expect managers to assess climate risks,” September 9, 2025
“California kicks off the era of mandatory climate disclosure,” November 1, 2023
“Busting three common ‘scope 3’ myths,” November 1, 2023
Looking ahead to 2026
As 2026 approaches, we can expect a similarly tumultuous year for the public policy priorities of the impact investing community. While we cannot predict what is to come, there are three key moments throughout the year on which to keep a close eye.
The end of January will bring another risk of a federal government shutdown. That said, on the heels of the longest shutdown in history that had direct impacts on the economy, the workforce and communities, lawmakers in Washington will be highly motivated to avoid another.
In the spring, there will be a change in leadership at the Federal Reserve as Chair Jerome Powell’s term expires. The independence of financial regulators, especially the Federal Reserve, is paramount for the health and resilience of the U.S. economy, which raises the stakes for the leadership transition.
Finally, the midterm elections in the fall will dictate the tone of the next 10 months, decreasing the likelihood of bipartisan progress in Congress and putting more pressure on the actions of regulators and states.
Even amid a chaotic policy environment, our collective work to advance a more sustainable, equitable economy continues. We look forward to continuing to partner with and learn from this community of Agents of Impact.
Fran Seegull is president of the US Impact Investing Alliance.