Climate tech funding could give cultivated meat companies a needed financial boost
Demand for meat globally is growing fast with projections pegging the need at 455 million metric tons by 2050 compared to 360 million metric tons last year, and yet countries around the world have committed to halving emissions and protecting 30% of global land and ocean ecosystems by 2030 – two desires that cannot easily coexist unless stakeholders consider new ways to balance both, said Daniel Gertner, a business analyst with GFI.
During a webinar hosted by GFI this week exploring the state of the cultivated meat market, he explained, “global climate goals … restoring biodiversity, improving food security and protecting public health … are impossible to achieve by continuing with business as usual meat production.”
But, he added, “cultivated meat can play an important role in the shift to alternative proteins” if companies can access the funds necessary to scale, source essential ingredients and infrastructure, and overcome other hurdles, including regulatory approval and consumer acceptance.
‘A challenging funding environment’
While funding from traditional investors continues to flow into the segment, he acknowledged there was a dramatic drop off last year, and suggested stakeholders should diversify their investment sources.
He explained that while alternative protein companies have nearly doubled the amount invested in them on average every year to raise $14.2 billion between 2010 and 2022, cultivated meat and seafood companies raised only $896m in 2022 – a 33% year-over-year drop.
“2022 was a challenging funding environment for companies across industries with falling public equity markets, rising interest rates due to high inflation, ongoing impacts of the pandemic and the invasion of Ukraine – all of these contributed to reduced investment activity across all sectors,” Gertner explained.
At the same time, he said, competition for investments in cell cultivation are increasing globally – pulling funding away from North American companies.
“Over the past decade plus, North America – and specifically the US – has dominated the global alternative protein investment story, but global investment funding has increased as alt protein awareness and popularity grew around the world,” he said.
As such, cultivated meat funding declined in North American in 2022 and it grew in Asia Pacific and Europe. In Asia Pacific, funding increased to $95 million in 2022 – almost double that of the previous year – while cultivated meat investments in Europe increased 30% year-over-year to reach $130 million in 2022.
Diverse investors needed for long-term growth
But knowing why funding is falling or where it is being redirected doesn’t make it any easier for companies that need it – which is why Gertner encourages cultivated meat companies to look at other sources for investment – beginning with climate tech funding.
He explained private and public climate investments between 2011 and 2020 dwarfed those of alternative protein investments from 2010 to 2022 at $2.4 trillion compared to $14.2 billion – and only a small fraction of that invested in alternative proteins went to cultivated meat, he explained.
Pointing to research by the Rockefeller Foundation and Boston Consulting Group that identified alternative protein as a “critical climate mitigation solution” with an unmet funding need of more than $40 billion, Gertner encouraged cell cultivated meat companies to more aggressively measure their environmental impact to apply for climate tech funds.
A new framework for assessing alt protein
Last year, GFI and the FAIRR Initiative developed a new “gap-filling set of ESG frameworks for the alternative protein industry” designed to “equip companies to assess and report environmental and social impacts of their business practices and their products,” GFi explains its recently published Cultivated Meat State of the Industry report.
“These frameworks help investors transparently understand the impacts of their investments,” and should help cultivated meat companies make their case for new types of funding, Gertner added.
While he acknowledged the “investment gap between alt proteins and other climate tech is large,” he said he believes this “indicates a massive runway for growth for alternative proteins if they are able to attract the capital” needed to scale.
Public funding options
Another investment option that is opening for cultivated meat and other alt protein companies is public funding from governments around the world.
Last year “saw the largest individual investments from governments to date impacting many points along the supply chain” to support cultivated meat, said Michael Carter, a policy associate at GFI.
“In the United States,” he added, “President Joe Biden released an executive order calling on agencies to produce a report on how biotechnology and biomanufacturing could be used to cultivate new food sources. And the resulting bold goals published last month positions alternative proteins, including cultivated meat, as key components of a future American bio-manufacturing ecosystem.”