26 Aug 2025 The Role of Donor-Advised Funds in Anti-DEI shareholder proposals
Context
Since the murder of George Floyd and the rise of the Black-lives-matter movement in 2020, the US has witnessed the uptake of DEI policies, DEI-linked executive pay compensation plans and increased affirmative action recruiting in large companies such as Microsoft, Apple, and Costco. Pressure has been rising not only from consumers, but also from investors, with activist investors increasingly entering the scene and filing proposals for increased DEI and ESG compliance with the SEC in the years since 2020. Conservative interest groups have long rallied against this behaviour, demanding that the market knows best and denouncing (green) shareholder activism as an unfair tactic that goes against the company’s duty to its shareholders’ best interests.
Over time, the initial opposition faded and a new strategy emerged, with groups such as the NLPC and NCPPR beginning to file their own proposals with the SEC in recent years. The themes of the proposals range from anti-abortion at Eli Lilly in 2023 (Broad, 2023) to anti-electric cars at General Motors (Darley, 2025), often citing skepticism toward mainstream climate science and a commitment to Christian conservative values.
Mr. Trump’s return to office in 2025 started his task of swiftly taking apart the DEI infrastructure in the US, capitalising on a growing public resistance to DEI topics. Public support for DEI dropped from 56% to 52% among working US adults between 2023 and 2024 alone[1]. While the second Trump administration passed a stack of executive orders retiring affirmative action in public college admissions and requiring DEI programs to be cancelled in federal contractors’ operations, the SEC received an influx of anti-DEI shareholder proposals, further adding pressure to public companies to align with the Trump government’s anti-DEI perspective.
When looking at who filed the proposals with the SEC on anti-DEI topics, a few names show up again and again: the American Family Association (AFA), the National Center for Policy and Public Research (NCPPR) and the National Legal Policy Center (NLPC). There are other significant parties that this analysis excludes for the time being, sacrificing some breadth for depth of analysis, and focussing on these three key players.
501(c)(3) charitable organisations and Donor-Advised Funds
This analysis looks at the publicly available information on funding sources for the AFA, NCPPR and NLPC, as all of them are donor-financed 501(c)(3) charitable organisations. The research shows a web of private foundations giving to donor-advised funds, who then pass the money on to organisations of the donor’s choosing such as the AFA or NCPPR. This grants the donor, oftentimes charitable organisations themselves, anonymity and tax deductible spending, while protecting them from any backlash connected to their spending that could potentially threaten their status as a 501(c)(3). This practice of anonymised giving through Donor-advised Funds leads to millions of dollars moving behind the scenes, and opens the question whether these organisations filing proposals with the SEC, as well as the organisations backing them, can be considered as politically neutral, tax-exempt charitable organisations, adhering to the limits placed on their political lobbying activities, as their 501(c)(3) status suggests.
To understand what is happening in this jungle of transactions, let’s clear some terms:
Charitable organisations denoted as 501(c)(3) are entities that are organized and operated exclusively for religious, charitable, scientific, literary or educational purposes, for testing for public safety, to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals. Status as a 501(c)(3) allows donors to make tax-deductible donations and makes the organisation itself exempt from income tax. A 503(c)(3) organisation (such as the AFA, NCPPR and NLPC) is subject to limits on political lobbying. The law states that “no substantial part” of a public charity’s activities can go to lobbying. Charities with large budgets may lawfully spend a million dollars (under the “expenditure” test) or more (under the “substantial part” test) per year on lobbying. There is no law defining precisely what a “substantial part” constitutes in i.e. percentage of income (Wikipedia contributors, 2025a). 501(c)(3) organisations are required to publish financial statements once a year to retain their status. Therefore, the financial statements of AFA, NCPPR and NLPC are currently publicly available online for the financial years up to 2023. All three have filed multiple proposals with the SEC on anti-DEI issues in recent years.
A donor-advised fund (DAF) is like a charity-focussed bank account that individual donors have. It allows donors to deposit cash or other securities in the DAF, surrendering ownership and enjoying immediate tax benefits, while retaining advisory benefits on how to disburse the funds in the DAF over time. In the words of environmental sociologist Robert Brulle at Drexel University: “This process ensures that the intent of the contributor is met while also hiding that contributor’s identity. Because contributions to a donor directed foundation are not required to be made public, their existence provides a way for individuals or corporations to make anonymous contributions” (Wikipedia contributors, 2024).
Conclusion
This dynamic points to a regulatory blind spot in U.S. non-profit and tax law, where donor-advised funds are not required to disclose the source of donations or the conditions attached to them. These findings also raise the broader question of whether current definitions of “lobbying” and “substantial part” activity for 501(c)(3) organizations adequately capture modern forms of indirect political influence, such as coordinated shareholder activism.
[1] https://en.sustainablevalueinvestors.com/2025/07/29/from-diversity-to-division-the-beginning-of-dei-backlash/