Issue sprouts ethical green shoots: Andrew Bibby encounters a timber yard in Norfolk that is big in ethics

A SMALL company that specialises in importing tropical timber from sustainable sources is the latest firm to try to raise capital through an ethical share flotation.

The Ecological Trading Company, set up in 1989, operates from an office in Newcastle and a timber yard in Norfolk. It brings hardwood into Britain from logging operations that it says are environmentally and socially acceptable.

A typical supplier is the community forestry project collectively owned by clans in Papua New Guinea, where logging is tightly controlled and commercial operations are banned.

ETC tried to raise extra capital from ethically minded investors in a private share issue last year, but with relatively little success. It has now taken the radical step of converting to a plc and issuing a prospectus.

'We are still very undercapitalised,' Barbara Douglas, company secretary, said, adding that the company wants extra resources to open a new yard closer to the Humber ports and to develop sales with customers such as B&Q, which currently buys small quantities of ETC-supplied timber mouldings.

ETC has set an ambitious target of pounds 750,000 for the new share issue, with a minimum level of pounds 150,000 (below that cheques will be returned to investors). Its share prospectus makes it clear that - although the company hopes in due course to pay 'an attractive rate' of dividend - shareholders are likely to be investing as much to support ETC's work in helping to preserve rainforests.

The minimum shareholding is pounds 100. However, shareholders investing pounds 500 or more can benefit from the tax relief available under the Business Expansion Scheme.

However, all ETC investors will need to bear in mind that - in common with non-quoted companies - there will be no automatic market for buying and selling their shares.

Hubert Kwisthout, one of ETC's founding directors, said there was no problem in identifying future sources of timber.

'The Solomon Islands and Papua New Guinea are the main areas at the moment, because people are a bit more organised there and tribes own the land,' he said. 'But various concerns in South America are also getting their act together.'

Despite the obvious risks, many ethical share issues have attracted a good response from investors. The Third World trading company Traidcraft, which pioneered the idea in 1984, raised a total of about pounds 1.8m in three share issues, while last year the Centre for Alternative Technology in Machynlleth, mid-Wales, successfully reached its pounds 1m share issue target. Attempts by some other companies to raise 'green' capital have been less successful.

ETC, 1 Lesbury Road, Newcastle upon Tyne, NE6 5LB (091-276 5547).