Investors in clean tech private equity companies could find themselves with a bargain as capital-raising difficulties force green entrepreneurs to offer them equity at preferential prices.

Last week, investors gathered at the Energy Institute in London to discuss how the difficult credit markets were affecting the sector, and what exits private equity investors could expect in struggling public equity markets.

Nigel Taunt (pictured), director of investments at environmental investment specialists Impax, said all companies would face a level of stress and that exits for investors would require more time and effort than before.

But difficulties in raising capital would drive entrepreneurs into the arms of existing investors, he said, predicting opportunities to buy further equity in portfolio companies at cheaper prices than the original investments – known as down rounds.

‘Entrepreneurs have to be more realistic about valuations,’ Taunt said. ‘Deals will get bigger and later-stage. There will be higher returns for those able to take on some of those distressed opportunities.’

Although the sector will not escape the current turmoil, Taunt believes the clean tech sector will bounce back quicker than most.

‘Environmental companies are driven by government legislation and long-term contracts. It’s difficult to see how those drivers are cyclical, yet we’ve suffered from the cyclical downturn in worldwide markets,’ he said. ‘Logically, when people realise they’ve had enough of the sackcloth and ashes, environmental stocks should be among the first to recover.’

Mark Shorrocks, chief executive of AIM-listed investment company Low Carbon Accelerator (LCA), said the market had been indiscriminate in its treatment of the environmental sector, having pushed LCA’s market capitalisation below the value of the fund’s cash holding. ‘The market’s basically attributing no value at all to our entire portfolio, which is nonsense,’ he said. ‘The current market environment means we get dragged down with everyone else.’