If you’ve spent any time on LinkedIn or watching the news lately, you've probably seen the term "DEI" thrown around like a political football. People argue about it constantly. But away from the shouting matches and the op-eds, there is a very practical, very expensive reality: DEI funding.
Basically, we're talking about the cold, hard cash that corporations, universities, and government agencies set aside to handle diversity, equity, and inclusion. It isn't just a vague "vibe" or a mission statement on a website. It is a line item in a budget.
But what does that actually look like in 2026? Honestly, it's changing fast.
What is DEI funding, exactly?
At its simplest, DEI funding is the capital allocated to programs that aim to support underrepresented groups within an organization. Think of it as the "infrastructure" of culture.
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It covers everything from hiring a Chief Diversity Officer (CDO) to paying for specialized recruiting software that hides the names on resumes to prevent bias. If a company spends money to make their office more accessible for people with disabilities or funds a mentorship program specifically for women in tech, that’s DEI funding at work.
Where the money usually lands:
- Personnel: Salaries for dedicated DEI teams.
- Education: Unconscious bias training (though these are becoming more "optional" lately).
- Recruitment: Fees for job boards that target specific demographics like Black engineers or Hispanic marketers.
- ERGs: Supporting Employee Resource Groups—those internal clubs for veterans, LGBTQ+ staff, or working parents.
- Supplier Diversity: Specifically choosing to buy office supplies or software from minority-owned businesses.
The "Venture Capital" of DEI
One of the most talked-about versions of this is venture capital DEI funding. You might have heard about the Fearless Fund. They were a VC firm that specifically gave grants to Black women entrepreneurs.
In 2024, they got hit with a major lawsuit by the American Alliance for Equal Rights, led by Edward Blum. The argument? That choosing who gets money based only on race violates the Civil Rights Act of 1866.
The case ended in a settlement in late 2024, but it sent shockwaves through the industry. Now, in 2026, most firms have pivoted. Instead of saying "this money is only for [X group]," they use "inclusion-forward" language. They look at "underserved markets" or "economically disadvantaged founders."
It’s the same goal, just different legal wrapping.
Why are budgets shifting right now?
The "Golden Age" of DEI spending—roughly 2020 to 2022—is over. Back then, companies were throwing money at the problem because of intense social pressure. Now, things are... let’s say, "refined."
According to recent data from Paradigm, about 23% of companies actually increased their DEI budgets for 2025 and 2026, but 19% cut them. The rest are just holding steady.
It’s not that the work is stopping. It’s that the work is getting quieter.
Many CEOs are tired of the "culture wars." They’re moving DEI from its own flashy department and tucking it back into general Human Resources. You'll hear them talk about "Belonging" or "Workforce Strategy" instead of using the DEI acronym. In fact, a 2025 report showed that the specific term "DEI" fell by nearly 98% in Fortune 100 communications.
Is the money actually doing anything?
This is the billion-dollar question.
Some studies, like the famous ones from McKinsey, argue that diverse companies are 21% to 33% more likely to outperform their peers. They say more perspectives lead to better products.
But other researchers, like Jeremiah Green at Texas A&M, have pushed back, saying the data doesn't always show a direct "straight line" between a DEI budget and higher stock prices.
The truth is usually in the middle. If you spend $2 million on a one-day "sensitivity training" and then go back to your old hiring habits, you’ve basically set that money on fire. The effects of that kind of training usually fade within 24 hours. But if you spend that money on fixing your pay scales (Equity) or making your physical offices accessible (Inclusion), that’s a permanent change.
The Higher Ed and Government Pullback
It’s impossible to talk about DEI funding without mentioning the government.
In early 2025, several executive orders started dismantling federal DEI offices. The Department of Education removed hundreds of DEI-related documents from its websites. For universities, this is a massive headache.
A lot of people think DEI funding in schools only helps minority students. Kinda wrong. DEI offices often manage programs for:
- First-generation college students (of all races).
- Veterans transitioning back to civilian life.
- Students with disabilities who need specialized tech.
When these budgets get slashed, those groups feel it the most.
What’s next for the money?
If you’re a business owner or an employee, don't expect DEI to disappear. It’s just evolving.
We’re moving toward a model called "Performance-Driven Inclusion." Instead of setting arbitrary "quotas" (which are legally risky anyway), companies are looking at data. They want to know: Are we losing our best female talent after they have kids? If so, let's fund better parental leave. Or: Are our job ads accidentally discouraging veterans? Let's fix the language.
Actionable insights for 2026:
- Focus on the "I" and "E": While "Diversity" (the D) is legally complicated right now, focusing on "Inclusion" (workplace culture) and "Equity" (fair pay for the same job) is still very much legal and highly effective.
- Audit your "Shadow Spend": A lot of DEI funding is hidden in recruiting fees. If you're paying for a premium LinkedIn Recruiter seat but only seeing the same demographic over and over, you're wasting budget.
- Don't wait for a lawsuit: If your funding is tied strictly to protected characteristics (like race or gender), talk to a lawyer. Most experts suggest broadening the criteria to include "socioeconomic status" or "geography" to stay safe.
- Measure retention, not just hiring: Getting people in the door is easy. Keeping them is hard. Use your DEI budget to figure out why people leave.
The era of "performative" checks is ending. The era of "integrated" spending is starting. Whether you love the acronym or hate it, the business of making sure everyone can actually do their job well is here to stay.
Check your own company's public disclosures for the last two years; you'll likely see a shift from "Diversity Reports" to "Human Capital Management" reports. That's where the money lives now.