Bank of America is expected to tweak the language of its environmental and social risk policy and lift restrictions on lending to gun makers and parts of the energy sector.
At issue is a sentence published in the June 2022 version of the bank’s Environmental and Social Risk Policy Framework that reads: “Based on the proper application of our risk framework and enhanced due diligence, the Bank has determined that it is not currently able to engage in the following activities.”
This sentence is the end of a paragraph that separates two “business restrictions” in Bank of America’s 2022 Framework. The top restrictions above this paragraph cover activities such as bribery, child labor, human trafficking and illegal deforestation. Below the paragraph on “things the bank cannot engage in,” the bank lists restrictions on payday lending, firearms financing, private prison financing and oil- and coal-related energy processing.
But the term “not available” does not appear in Bank of America’s risk framework, which was updated in December.
Instead, it essentially reads: “Accordingly, any customer relationships or transactions relating to the following areas must undergo an enhanced due diligence process and be escalated to the applicable business unit’s highest level risk review body for a decision.”
This move can be interpreted as changing the issue of lending firearms from a “non-negotiable no” to “let’s ask for legal permission.”
The bank declined to provide details about what the risk assessment would include, according to the New York Times.
To further separate things like human trafficking (listed as a “business restriction”) from firearms and fossil fuels, the bank inserted a new subheading in its updated framework: “business escalation.”
Subtle changes to Bank of America’s risk framework[send] “This is a very bad sign,” Lucy Pinson, director of Reclaim Finance, a nonprofit that scrutinizes the climate strategies of fossil fuel companies, told The New York Times.
But Drew Stevenson, a professor at South Texas College of Law, told Bloomberg on Friday that the changes “may be more of a workaround than a true change in banks’ thinking.”
Bank of America Risk Framework 2019 The company described funding certain firearms manufacturers as “contrary to our values, business principles and code of conduct.”
Bank of America agreed to stop lending to certain gun manufacturers after the 2018 mass shooting at a Parkland, Florida, high school left 17 students and staff dead.
“It is not our intention to lend these military-type firearms to the civilian market,” Anne Finucane, then deputy governor of the bank, said at the time.
Finucane then said the bank had engaged in “intense discussions” with “a handful of manufacturers,” according to The New York Times. He said manufacturers’ reactions to the bank’s change of policy had been “mixed.”
But six years later, some states, including Parkland’s, have fought back against banks that have chosen to scale back or reduce loans for conscientious reasons.
Florida has divested about $2 billion in assets from BlackRock in 2022, making it by far the biggest target in a Republican-led state campaign against environmental, social and governance policies that would restrict lending.
Bank of America Paused The company suspended its public finance activities in Texas in 2021 after the state passed a law targeting banks that restricted lending to firearms-related companies.
The following year, the state The U.S. government added BlackRock and nine other financial institutions, mostly European, to a list of companies boycotting the fossil fuel sector. The move would require state pension funds to divest from companies on the list. The list has expanded over the past two years, but does not yet include any U.S. companies other than BlackRock.
Meanwhile, Bank of America has re-entered the Texas municipal bond market and is quickly solidifying its position.
Bank of America has underwritten about $1.1 billion in Texas municipal bond transactions in 2024, Bloomberg reported, up sharply from about $278 million in the same period last year. That makes Bank of America the eighth-largest deal manager in Texas. It was ranked 18th in 2023, the news agency reported.
With the re-entry, banks are facing questions. Bank of America was one of eight banks that received a letter from the Texas attorney general in November asking about partnering with the Net Zero Climate Alliance.
