Non-profit sector bank Triodos is pioneering a mini-ethical stock market for investors in social businesses.
The Ethical Exchange or Ethex will publicly launch in May or June but is already operational. It currently includes four stocks: the Ethical Property Company, the Wind Fund Company, a Mencap bond issue and the bank's own shares.
James Vaccaro, commercial manager of Triodos, said the bank has plans to list many more ethical firms on the exchange. He added the number of share issues it is negotiating is in double figures, with at least four more scheduled in the next 12 months.
Under Ethex's matched bargain, market investors can buy shares in "listed" companies as well as sell them on to recoup their investment.
"There is a big demand from customers who have savings with the bank and support charities through lending, but who want to make investments as well. And charities need the equity. This is no longer something that is a quirky alternative, although it is a real alternative to the stock market," said Vaccaro.
The move to establish Ethex was prompted by the success of recent share issues sponsored by Triodos. The Wind Fund Company, which supports renewable energy, raised £2.5 million in 1995 and 1999, while the Ethical Property Company closed its share issue earlier this year raising a total of £4.2 million.
Vaccaro said that that Ethex would give people the confidence to invest by providing a way for them to get their money back.
"It is a long-term, not a quick buck investment," he said. "Investors want a bit of comfort, a mechanism to buy and sell shares. However, there is no guarantee that you could sell, so it is still a risk investment."
Helen Wildsmith, executive director of the UK Social Investment Forum, backed Ethex. "There is a demand for alternative investments but there has been a problem with liquidity and that means some people are put off.
If this exchange could deliver that it would be fantastic," she said.
"There have been three share offerings this year - the Ethical Property Company, Traidcraft and the London Rebuilding Society - and they have all been fully subscribed. There is obviously a demand. Also there is a market both for companies in the field to get equity investment and for people to invest in them."
At present, the matched bargain market requires a buyer and seller before investors can trade in shares or bonds. But Triodos is looking to develop a more active market where investors can sell their shares without the need to find a buyer.
"This is some way down the track, however, and would require approval from the Financial Services Authority," said Vaccaro.