Dark Money and the Role of Investors in the Push for Political Spending Transparency

Published on

March 10, 2021

Every year American corporations spend hundreds of millions of dollars in political spending. Called dark money, these donations create a lack of transparency in both politics and business. Learn how OpenInvest can help investors play a role in holding businesses accountable.

Every year American corporations spend hundreds of millions of dollars to support political candidates and shape policy at both the state and national levels. United States laws prevent companies from making direct contributions to federal candidates or national political parties. Yet, companies can still make undisclosed political donations through dark money groups.

Dark money donations create a lack of transparency in both politics and business. Dark money hides citizens from the true motivations of both companies and their elected officials. Undisclosed political donations call into question the ability of elected officials to make policy decisions on the causes you care the most about such as climate change, taxation, redistricting, criminal justice reform, or LGBTQ rights. It also builds distrust in companies when you don’t know if what they say is what they actually do.

At OpenInvest, we wanted to create more transparency in the political process. This is why we launched our Divest from Dark Money Cause in 2018. We are the first and only company to offer an investment solution that enables investors to divest from dark money. By divesting from dark money, investors can purge their portfolios of companies that hide their political spending activities or policies and invest in those leading in transparency around their political donations.

This year, we've updated our Divest from Dark Money company scores to continue building portfolios that align with clients’ values. As we launch these updates we also wanted to reflect on the state of dark money today and share how investors can play a role in holding businesses accountable.

What is dark money?

Dark money is any undisclosed or unknown political spending meant to influence local or national political outcomes. Dark money occurs across all party lines, with the majority of its spending coming from nonprofit or 501(c) organizations that do not have to disclose their donors to the public.

Unlike dark money, traditional political spending has a cap on contribution limits and requires the disclosure of donor names. Through traditional political spending, donors can coordinate efforts to help elect a political candidate, but their efforts are not hidden behind anonymous walls.

Dark money has been a part of our political history for a while but gained traction after the Supreme Court’s 2010 Citizens United v. FEC decision. The Supreme Court ruled on January 21, 2010, that restrictions on corporate spending were unconstitutional.

The court ruled that companies can spend an unlimited amount on political donations in support of or in opposition to any political candidate. This paved the way for companies to increase their political spending, with dark money donations becoming more and more the norm.

Image source: The Center for Responsive Politics

While the Supreme Court at the time believed that corporate donations couldn’t corrupt political influence, today it’s clear that the line between business and politics has become blurred. The necessary systems for disclosure haven’t kept up with the rise of undisclosed dark money spending.

In the past decade after the 2010 ruling, dark money groups have spent over $1 billion on election influence through television and online ads. In the 2020 election alone, more than $750 million in political ads and campaign contributions came from dark money groups.

Many companies who spend money lobbying or donating to certain causes are actually donating to organizations that are in opposition to their publicly stated positions. In 2017, for example, 19 companies who proclaimed support for the Paris Climate Accords gave more than $1 million to associations that then supported the election of attorney generals who directly opposed climate change action.

As the Paris Climate Accord example demonstrates, dark money leaves citizens in the dark. Without transparent disclosures of political donations, you have no way of knowing which politicians are "in the pocket" of which companies. Nor do you know which companies are actually performing actions aligned with what they claim to stand for. Not only does dark money have huge implications for our democratic process, but it builds distrust in an already highly distrustful political environment.

Rising distrust leads to increasing business transparency

Trust has all but deteriorated in 2020 and into 2021. Businesses are the only trusted institution today. The majority of Americans believe that NGOs, government, and the media are neither trustworthy nor competent. Citizens are turning to business to solve our greatest societal challenges. As a result, businesses are starting to feel the pressure of their growing role in the democratic process.

As the most trusted institution, businesses have an even greater responsibility to the consumers they serve than ever before. As a result, more and more companies are realizing the benefit of increased transparency and adopting stronger policies around disclosure. However, this hasn’t always been the case, and we still have a long way to go.

In the past, companies have had very little incentive to stop their political spending. The process has become such a norm that its ceasing becomes a competitive disadvantage. The aim of a business is profit and anything that will help maximize that profit is often considered fair game. However, in today’s heated political environment characterized by a rising distrust, there is increasing financial risk involved in any kind of lack of transparency.

This financial risk has led to an increase in accountability. The Center for Political Accountability (CPA), a nonpartisan nonprofit research organization, reported in their 2016 CPA-Zicklin Index that only 3 percent of all S&P 500 companies, or 15 companies, fully disclosed their corporate political spending. In 2020 that number jumped to 32 companies, more than doubling. Additionally, two hundred forty, or nearly two-thirds of core companies had policies in 2020 for fully disclosing or prohibiting donations to candidates, political parties, and committees.

Image source: 2020 CPA Zicklin Index

Many of these companies are also increasing board oversight and committee review of political spending. Back in 2016, only 111 companies had these policies around board oversight and committee review. In 2020 this number jumped to 162 companies. As financial risk pressure rises, so will the number of companies who feel compelled to put in place more transparent policies.

The CPA uses Walmart, AT&T, and Microsoft as examples of the kind of unwanted media attention and scrutiny that can befall any company caught red-handed with dark money funding. In the case of these companies, the scrutiny was even worse considering their undisclosed donations were to organizations directly opposed to their public stance.

When trust is hanging in the balance, no company wants that kind of attention. This has started the trend towards increasing transparency and accountability in political spending. A trend that investors are well-positioned to push further forward.

The role of investors in dispelling dark money

As support for dark money disclosure increases, this opens the door for investors to take advantage of this shift and wield their influence on businesses to continue this positive trend. While we have seen a rise in the number of companies that are fully or partially disclosing their political spending, there are still companies ranking in the lowest tier for transparency. These companies, including Netflix, DISH Network, and Fidelity, could use additional financial pressure.

OpenInvest’s Dark Money Cause allows investors to divest from companies that fail to publicly disclose their practices and oversight as they related to corporate political spending. Instead, investors can proactively invest in companies that are transparent about funds used for political purposes and have strong oversight controls in place to govern the use of these funds.  

The power to divest from companies participating in dark money funding allows investors to hold businesses accountable. This accountability provides a further financial reason for companies to invest in transparency policies and practices.

Using internally developed thresholds based on the findings of the CPA-Zicklin Index, OpenInvest looks for companies with strong and consistent disclosure and accountability policies and practices for election-related spending. We then remove companies from your portfolio that do not disclose these practices or institute policies for spending to influence elections.

“OpenInvest holds a foundational belief that investors deserve to know what their money is endorsing," said OpenInvest co-founder and chief strategy officer Joshua Levin. “With no meaningful rules governing dark money spending, our Divest from Dark Money Cause is the strongest mechanism for shareholders to penalize companies that hide their efforts to influence politics.”

The Dark Money Cause not only aligns an investor's portfolio with their values but also encourages companies to make better financial disclosures. Through investor pressure, we can move away as a society from dark money. Instead, we can move towards increased disclosure and accountability across all publicly traded firms.

As the 2020 CPA-Zicklin Index states, “as years of research in political economics and development economics have shown, healthy, prosperous societies rest not only on vigorous free markets but also on competent, transparent, democratically elected governments and strong civil societies.”

Learn more about how your clients can invest according to their values by getting in touch with us at advisorservices@openinvest.com.


Investment in securities involves the risk of loss. Past performance is no guarantee of future returns. One cannot invest directly in an Index. Any opinions, estimates and forecasts offered in this document constitute judgment as of the date of the materials and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information contained in this document to be reliable but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only and it is not intended to provide and should not be relied on for investment, accounting, legal or tax advice. OpenInvest may not have verified (and disclaims any obligation to verify) the accuracy or completeness of any information herein that has been provided or obtained by third parties.

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