Philanthropic due diligence in 2025: Challenges and opportunities

Formalising due diligence is becoming more prominent. While the UK advanced in this area around 2021, only a few US organisations had due diligence processes in place. By 2023, nonprofits in the US began to recognise the term, and by 2024, it became an established practice. Our co-authored 2024 International Due Diligence Survey with BWF backs this, showing that 84% of nonprofits worldwide now have formalised due diligence processes. Now, there’s growing pressure from stakeholders for greater transparency and scrutiny of philanthropic wealth. This calls for nonprofits to go beyond formalised processes by systematising and centralising decision-making. We sat down with Rhodri Davies from Why Philanthropy Matters to learn what this means for nonprofits in 2025 and how they can adapt.

Contextualising philanthropic wealth

There is a growing demand to better understand the context of philanthropy and the wealth behind it. In the past, the focus was often solely on how money was donated, with little consideration of how it was earned. The “left-hand, right-hand” mentality treated giving and earning as separate issues. However, this approach is no longer sufficient. Today, people want a more holistic view, considering not only how wealth is created but also how it is invested. They want to see the entire story as one coherent narrative.

At the same time, there is increasing pressure from various stakeholders for transparency and scrutiny of philanthropic wealth. This shift is partly due to the greater availability of information. Individuals now have access to a broader range of resources. As a result, various groups are demanding more openness. For instance, supporters of an organisation might want to know its policies on accepting large donations. Beneficiaries—such as students or individuals receiving charity—may feel entitled to ask questions. Likewise, members of museums or cultural institutions might want clarity on how these organisations handle external funding. Overall, the public is more informed and empowered than ever before. 

Demonstrating gift acceptance decisions

Questions regarding the source of wealth and its legitimacy in philanthropy are not new. However, the context surrounding these questions has shifted. The pressure now comes from both sides. On one hand, there are arguments that nonprofits must scrutinise wealth more carefully and reject questionable gifts. On the other, some push back, arguing that rejecting gifts requires strong justification. 

This is partly because opinions on what constitutes acceptable money vary widely, but also due to legal considerations. For example, in the UK, the bar for refusing or returning a gift is set high. Organisations must provide solid evidence and a clear rationale for such decisions. As a result, it is more important than ever to conduct thorough due diligence, make informed decisions, and communicate the reasoning behind those decisions. Demonstrating the process and explaining the rationale will be critical in 2025.

Centralised versus decentralised processes

There is an increasing demand to make better decisions about whether to accept certain gifts or maintain relationships with specific donors, while also having the ability to document and justify these decisions. As a result, there is a clear drive for consistency in policies across an organisation. Centralising these processes makes sense to ensure uniformity. However, if everything were entirely centralised and rule-based, the question would arise: why not automate the entire due diligence function?

While automating the process may seem appealing, there are strong reasons why this would be problematic. Human involvement is necessary to interpret nuanced factors that automated systems may miss. Therefore, a balance must be struck, ensuring that human oversight complements automated tools.

One benefit of setting principles in a gift policy or official document is that it provides clear guidance for an organisation’s approach. However, these principles should not be treated as fixed rules. Instead, they should encourage ongoing discussions within the organisation about its values, and perspectives, and how these influence its approach to prospect research and due diligence. This is particularly important as technology, politics, and other factors evolve rapidly. A gift policy should be viewed as a living document that evolves with the organisation, involving all stakeholders in its development.

AI technology will support all these areas

AI offers significant potential for enhancing philanthropic due diligence. Due diligence is a data-intensive task, and AI can provide valuable support in this area. One key advantage of AI is its two-phase capability. First, it can find and read unstructured data (blogs, news reports, interviews etc) Then, it can analyse it to identify risks and summarise a full report. 

In philanthropic due diligence, AI enables access to a far broader range of data than ever before. Traditionally, no one would have the time to sift through vast amounts of unstructured data. A human simply couldn’t handle it. 

There’s a saying: “The best place to hide a dead body is page two of Google,” implying that most people stop looking after the first page of results. AI helps overcome this limitation by processing large volumes of information, including documents, videos, audio recordings, and social media content that would be too lengthy or complex for any individual to review in detail.

AI also addresses challenges like language barriers. It’s unrealistic to expect humans to process large volumes of material in multiple languages, but AI can bridge this gap. With AI tools, organisations can draw on global sources of information, which is increasingly important in a world of globalised wealth. Hidden insights—whether buried in foreign-language media or social media—can now be uncovered, enabling more thorough and accurate due diligence.