Over the last two years, we’ve witnessed the explosion of generative artificial intelligence (AI) technology, which has already transformed nearly every sector of the economy.
In a McKinsey study on the state of AI in 2024, 65% of organizations adopted generative AI in at least one business function, up nearly double the rate in 2023[1]. Building on predictive machine learning models, generative AI goes beyond perceiving and classifying content to creating complex new images, text, code, and audio, often indistinguishable from human-generated content. The companies behind “Generative AI”[1] have already upended traditional business models and seek to radically transform every sector of the economy. The adoption of AI can have meaningful applications for mission-driven organizations, including innovations that support social and environmental impact work.
These milestones, however, are balanced by the rapid speed of development and adoption that has been a growing cause of concern. The use of generative AI has also been associated with generating false images, deepening racial and social inequities, and offering scammers and criminals a tool. As generative artificial intelligence reshapes industries and commands headlines, it also raises urgent questions for philanthropies: How can we responsibly harness AI's potential while mitigating its risks? And what role should philanthropies play in shaping the future of this transformative technology?
Understanding the Risks
Nonprofits and philanthropies should note three key areas of risk, portrayed in the graphic below:
A Mission-Driven Investment Response
Nonprofits and foundations can navigate this complexity by embracing a multi-pronged strategy:
1. Prioritize Corporate Governance and Oversight
Investors should look for companies with strong governance frameworks that address AI use, including oversight committees, risk assessments, and transparent policies around data and IP. The EU’s AI Act and the U.S. Executive Order on AI both signal a growing focus on accountability. Outside of government legislation, philanthropies can assess if companies are leveraging emerging standards to identify and monitor risks associated with AI, including the National Institute of Standard and Technology (NIST) and the International Organization for Standardization (ISO) respective documents on risk management for AI.
2. Engage Companies on AI-Related Risks
Investors may utilize shareholder engagement tools (e.g., resolutions, proxy votes, direct dialogue) to dig into company approaches to AI, including governance and oversight, impact assessments on stakeholders, and energy usage. This includes pushing for AI transparency reports, ethical guidelines, and investments in human oversight alongside algorithmic tools. Shareholder coalitions are already doing this: the AFL-CIO, for example, filed resolutions with major tech and media firms demanding more clarity around responsible AI use.
3. Center Equity and Human Rights
AI adoption must be approached with equity at its core. For philanthropies, this means investing in solutions that close — rather than widen — gaps in healthcare, education, and financial access. It also means funding the voices and leadership of communities most impacted by algorithmic harms, including Black, Indigenous, and people of color (BIPOC) communities, and those historically excluded from tech development and deployment.
4. Support Ethical Innovation and Infrastructure
Capital can also be directed toward companies and initiatives building ethical and inclusive AI infrastructure. This includes developers creating transparent, explainable AI models, startups prioritizing sustainability in data center design, and platforms advancing AI for social good — such as predictive tools for climate resilience or health equity.
Looking Ahead
Nonprofits and foundations have a unique opportunity and responsibility to shape a future where innovation is rolled out with equity at the center and that serves people and planet. There will be winners and losers in how companies deploy AI. Those with foresight, transparency, and a clear commitment to equity and sustainability will be best positioned to lead and to deliver long-term value.