As DEI policies come under legal attack, philanthropic donors consider how to adapt

Foundations and major donors aren't just watching court cases like the Supreme Court’s June decision ending affirmative action at universities, the ongoing lawsuit against a grant program aimed at supporting Black women entrepreneurs, and other legal challenges targeting corporate diversity programs.

They are mobilizing to respond.

Some nonprofits are financially supporting the lawsuits driving these cases. Others are calling for larger foundations to help grantees if they are sued or are offering legal assistance themselves. Leaders of nonprofits on both sides of the issue say that will intensify this year, even as some groups change the way they describe their work to try to sidestep the controversy.

One battleground will be the lawsuit challenging grants from the Fearless Fund, which awarded $20,000 to businesses that are at least 51% owned by Black women, among other requirements.

A federal appeals court ordered the fund in October to temporarily halt its grant program in response to arguments that it discriminates against people who are not Black. The fund’s attorneys have countered that the grants are not contracts but rather, donations protected by the First Amendment.

Leading the challenge against the Fearless Fund is Edward Blum, president of the American Alliance for Equal Rights, a nonprofit that received less than $50,000 in 2021 and 2022 respectively, according to tax filings, but it's unclear who its donors are.

Blum is also the man responsible for spearheading the efforts to overturn affirmative action in university admissions. In that case, another nonprofit group — Students for Fair Admissions, of which Blum is president — received donations from funders such as the The Searle Freedom Trust and the Sarah Scaife Foundation as well as from organizations that host donor-advised funds, like Fidelity Investments Charitable, Donors Trust and the National Philanthropic Trust.

Blum acknowledged the donations in an emailed response: “Those donations were simply granted to us without any kind of a contractual agreement.”

The Fearless Fund has also received backing from the nonprofit world. The Council on Foundations, which supports philanthropic foundations and provides legal resources to its members to help them consider potential legal risks, submitted an amicus brief in the case supporting the Fearless Fund's First Amendment argument.

Kathleen Enright, president and CEO of the council, said so far, none of the lawsuits or court decisions restrict grantmaking programs related to race.

“If you’re committed to DEI or race-conscious or race-based giving, you should not back down on your priorities. All of that is and remains legal,” she said.

John Palfrey, president of the John D. and Catherine T. MacArthur Foundation, said his organization will continue to provide funding to grantees like Harvard University, where its president, Claudine Gay, resigned last month after detractors criticized her Congressional testimony about antisemitism on campus and also accused her of plagiarism. Activists like Christopher Rufo, a senior fellow at the Manhattan Institute, and hedge-fund investor, Bill Ackman, claimed that Gay was unqualified and hired as a result of Harvard’s DEI policies.

As a general policy, Palfrey, who teaches law at Harvard, said MacArthur does not tell its grantees what to do. But he said, “We certainly hope that they will continue to do the work that creates a more diverse and equitable, inclusive society.”

The attacks on DEI efforts are, however, having a chilling effect on some funders, said Mae Hong, vice president of Rockefeller Philanthropy Advisors, which advises foundations, families and individual donors. She said some foundations already have removed language about commitments or programs related to racial equity from their website and applications.

“So for instance, we’re not funding educational equity. We’re funding the achievement gap. We’re not funding race-based poverty among Blacks. We’re funding homelessness or employment or the wealth gap,” she said as examples of changes in wording funders have made.

Carmen Rojas, president and CEO of Marguerite Casey Foundation, sees these attacks as a broader backlash to “the modest gains that have may been made and that were made in the 20th century to address centuries of harm committed against people of color in this country.”

In this mix of polarized and toxic forces, Rojas argued that foundations like hers are well positioned to take heat for supporting programs aimed at achieving a more justice and equitable society.

“We can afford the legal exposure in ways that many of our grant recipients can’t,” Rojas said.

The Black Freedom Fund, which was founded in 2021 to fund Black community organizations in California, has started a legal defense fund for its grantees for precisely that reason. Marc Philpart, its executive director, said the attacks on grantmaking that supports racial justice are coming because of the progress that's been made, however fragile.

“It’s clear that there is an understanding of the role that philanthropy has played in furthering social justice, especially following the racial reckoning of 2020,” Philpart said.

Hong also advises foundations that they may not be as vulnerable as they think they are. She encourages funders to see their philanthropy as an expression of their values and challenges them to stand by those values, especially in difficult times.

“Foundations are really the last bastion of truly independent actors in society because they’re not beholden to shareholders or voters,” Hong said. “So if foundations aren’t going to take a stand, who will?”

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