Over the past year, community climate finance in the United States has faced significant disruption, driven by broader challenges affecting community development financial institutions and the freezing of key federal funding streams, including the Greenhouse Gas Reduction Fund. To understand how these shifts are affecting lenders on the ground, The Kresge Foundation and Climate Impact Advisors engaged nearly 50 community lenders nationwide, including CDFIs, green banks, and credit unions, at a time of heightened uncertainty for the sector.
Despite funding disruptions, the core business case for climate lending remains intact. Investments in climate resilience and energy efficiency continue to lower energy costs, improve living conditions, and strengthen local infrastructure. Demand for these projects remains strong, and lenders broadly recognize their long-term financial and community value.
To deepen insights from these initial conversations, additional analysis was undertaken with partners including NRDC and the University of New Hampshire, drawing on more than 85 interviews with lenders, investors, developers, and sector experts. This expanded research seeks to identify viable pathways for sustaining and scaling community-based clean energy finance, with comprehensive findings to be released in a joint report in early 2026.
The disruption of federal funding has created a clear divide among community lenders. Larger, nationally active lenders with established clean energy portfolios have largely been able to continue lending activity. Their existing expertise, staffing, and market relationships allow them to keep projects moving, particularly as key clean energy tax incentives approach expiration.
Smaller community lenders have been far more affected. Many had been preparing to expand clean energy lending with anticipated federal support, including training, technical assistance, and capacity-building grants. When those resources stalled, progress slowed sharply, leaving these lenders without the operational foundation needed to scale lending efforts.
These challenges are especially acute in markets where borrowers are less prepared to adopt clean energy solutions and where contractor and service provider networks are underdeveloped. As a result, communities that could benefit most from lower energy costs and more resilient housing risk being left further behind.
In response, market readiness has emerged as a critical priority. Rather than focusing solely on capital availability, policymakers, funders, and industry leaders are encouraged to invest in strengthening local ecosystems that support clean energy lending. This includes region-specific training, hands-on technical assistance for borrowers and lenders, and ongoing support to help institutions navigate real-time project challenges.
Strong local coordination is also essential. Successful clean energy projects depend on collaboration among lenders, utilities, housing agencies, contractors, workforce groups, and public institutions. Supporting local coalitions and convenings can help align strategies, reduce silos, and improve project outcomes.
At the same time, community lenders are exploring ways to maximize limited capacity. Shared resources, technology-enabled tools, co-lending structures, and better knowledge-sharing can help lenders expand climate-related activity while managing risk. Many lenders are already financing climate resilience improvements through standard housing or small business loans, even if these investments are not explicitly labeled as climate finance.
While uncertainty persists, the current moment presents an opportunity to plan strategically rather than retreat. By investing in capacity, coordination, and market readiness now, the clean energy lending ecosystem can be better positioned to scale quickly once capital flows resume. With the right groundwork, community-based climate finance can emerge stronger and more resilient, delivering lasting economic and environmental benefits for underserved communities.
