Bank of America modifies its policies on gun ownership and energy funding
In a significant shift, Bank of America has updated its environmental and social risk policy regarding firearms financing and certain energy sectors. The changes, announced in December 2022, replace a blanket ban on gun lending with an enhanced due diligence process that involves case-by-case reviews for such transactions.
The new policy sees Bank of America assessing firearms-related financing requests individually, rather than applying broad prohibitions. This more detailed scrutiny is aimed at better managing risks without outright refusal. The bank's decision to adopt this approach responds to criticism and regulatory pressures to avoid banking discrimination against firearms businesses.
Regarding certain energy sectors, the updated policy aligns with broader U.S. government actions, showing increased scrutiny and restrictions on energy transactions related to Russia’s energy sector due to sanctions and national security concerns. It is reasonable to infer that Bank of America applies heightened review for financing related to energy sectors deemed high risk based on geopolitical and environmental factors.
The revised policy states that any firearms-related client relationship or transaction must go through an enhanced due diligence process. This process is designed to ensure compliance with regulations and manage reputational and legal risks.
The changes in Bank of America's policy could be interpreted as a shift from a non-negotiable "no" to a "let's-ask-legal" approach to firearms financing. Florida, for instance, pulled approximately $2 billion in assets from BlackRock in 2022, following the inclusion of the company on a list of companies that boycott the fossil fuel sector. However, the list has grown over the past two years but has not yet included an American company apart from BlackRock.
Bank of America's revised policy also includes a change in the language regarding firearms financing. The bank's previous policy stated that it was unable to engage in firearms financing based on its risk framework. In contrast, the revised policy is more nuanced, stating that firearms-related client relationships or transactions must go through an enhanced due diligence process.
The bank's revised policy comes at a time when it is re-entering the Texas market for muni bonds. Bank of America underwrote about $1.1 billion of Texas muni deals in 2024, compared with about $278 million over the same period a year ago. As the eighth-largest manager of deals in Texas, Bank of America's position in the Texas market is significant.
Some critics, such as Dru Stevenson, a professor at the South Texas College of Law, suggest that the changes could be a workaround by the bank rather than a true change in their perspective. Lucie Pinson, director of Reclaim Finance, also expressed concern about the changes in the bank's policy.
In 2018, Bank of America agreed to stop financing the operations of certain firearms manufacturers following a high school shooting in Parkland, Florida. The bank worked with a handful of firearms manufacturers and had intense conversations regarding the policy change. The reactions of the firearms manufacturers to Bank of America's policy change were mixed.
The moves by Bank of America and other financial institutions to revise their firearms financing policies reflect a broader trend of increased scrutiny and regulation in the sector. As the debate around gun control continues, it is likely that we will see more financial institutions re-evaluating their policies in this area.
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