With Fewer Federal Incentives, Investors Struggle To Fund Sustainable Buildings

As the federal government guts tax credits to developers trying to make their properties more environmentally friendly, the sustainable building industry has been forced to pivot.

The demand to create energy-efficient buildings that use clean fuel sources isn’t going away, even as the One Big Beautiful Bill Act strips funding for retrofits and solar panels, green building experts said last month at Bisnow’s National Sustainability and Energy Conference.

But with fewer incentives, everyone from investors to developers and consultants in the space has to think about how to cover the new gaps in their financing.

“Our aggression on being more green is going to depend on being able to get like-minded capital, philanthropic capital, municipal financings,” Gizman Abbas, principal of Direct Invest Development, said at the event, held at Convene 360 in Manhattan.

The OBBBA, signed into law by President Donald Trump on July 4, significantly undercuts provisions from the Inflation Reduction Act that were intended to accelerate the green economy in the U.S. Among the changes are requirements that existing solar or wind projects set to get a tax credit must begin construction by July 4, 2026. 

The reduced incentives, which had more uptake in red states than blue, have already killed one project that Abbas was working on in Georgia, he said.

For that development, Direct Invest Development had expected to receive funding from the Green and Resilient Retrofit Program — a billion-dollar incentive designed to make retrofitting affordable housing more affordable. Abbas believes the financing would have allowed the developer to build “some of the greenest buildings the state of Georgia has ever seen.”

That is no longer possible, he said, although he added that the development doesn’t intend to reduce its sustainability components to zero.

Federal legislation isn't the only factor changing the number of financing options that developers have.

Weeks before Trump’s inauguration, the six biggest banks in the U.S. left the Net Zero Banking Alliance, a United Nations-sponsored group for global banking to set sustainability targets.

Some analysts attributed the mass exits to changes in the political climate, although others pointed to a consensus that rising energy demand means humans may need to tap all available energy sources, including fossil fuels.

Participating in the alliance had put pressure on banks to demonstrate carbon emissions reductions tied to the dollars they deploy, said Nadine Anderson, vice president of acquisitions at investment firm Galvanize Climate Solutions.

Now, there’s less pressure to do so, and less capital available.

“Unfortunately, most of the banks, they were offering that without any sort of competitive spread or competitive terms, so I don't think it really came to fruition,” she said. “Then a lot of that just kind of dried up over the last six months.”

Investors that have put money into a broader range of sustainable energies might be able to switch focus, said Yoni Tammam, a vice president of tax insurance for insurance broker CAC Specialty.

“Those that had a, call it, dual focus of solar and battery may be looking more towards batteries now, because obviously that was less scathed in the new bill, the new Act, than solar and wind,” he said.

But without the tax credit to subsidize costs, an untold number of planned solar panels may disappear from developments across the country, from single-family homes to data centers. Added to the other costs that developers and eventual tenants may face, investors and builders have been left with a gap to fill. 

“The economics that you're seeing in solar and batteries, the increasing cost of utilities — that exists now,” Anderson said. “So while there is a changing framework of rollbacks of some of the incentives, the economics are still there, and it's really a supply and demand issue.”

Another way to fill the gap is to cater to the green energy wishes that tenants often have, Abbas said. After conducting market research on renters in some of its existing buildings, Direct Investment Development found that renters remain excited about living in sustainable buildings.

“They really want purified air in their buildings, purified water in their buildings, their carbon footprints managed,” he said. “So when you're targeting those types of potential renters, every percentage extra that you get on your rent helps you on your financing. And so that's really what we're leaning towards.”

But the industry’s clearest next step is a tried-and-true method that has served it well over the decades, developers said: Lobbying.

“As a climate-focused investment manager, it's always been nonnegotiable, and the way that we think about it is: our investment strategy has to work throughout political cycles,” Anderson said. “Obviously it was a lot easier a year ago, when you had the IRA there.”

Average electricity prices increased by 13% from 2022 through 2025, according to the U.S. Energy Information Administration, and they are projected to rise further as artificial intelligence data centers strain power grids. 

Politicians of all stripes care about their consumers’ abilities to pay their energy bills comfortably, Abbas said. More energy-efficient buildings mean lower electricity bills, so developers’ and lobbyists’ arguments haven’t changed.

“We'll continue to lobby, because we believe these sustainable investments are not yet self-sufficient,” he said. “We haven't changed how we approach, but our lobbying efforts have sure got sharper.”