By Nick Hedley
With the shift to clean energy now gaining momentum, private
equity and venture capital firms are seeking opportunities in other new
industries that are central to the world’s decarbonization efforts – including
alternative protein.
The livestock industry is a significant contributor to
climate change, generating 14.5% of the world’s greenhouse gas emissions,
according to the Food and Agriculture Organization of the United Nations. Cattle
farms, which produce beef and milk, are the sector’s biggest emitters.
To tackle the problem, livestock companies are turning to
better feeds to reduce methane generated during the digestion process, among
other strategies.
Meanwhile, some investors are placing their bets on a rapid
shift towards plant-based alternatives.
Sharyn Murray, investor engagement manager at the Good
Food Institute, says the alternative protein
industry could be worth $1 trillion by 2050, citing estimates by Credit Suisse
and other groups.
Speaking at the State of Wisconsin Investment Board (SWIB) investment
forum, Murray said the industry was worth $7.4 billion in the U.S. last year – up
from $5.4 billion in 2019. Plant-based food sales are growing three times
faster than total food sales, she said.
While a number of companies in this space have turned to
public markets for capital – including Beyond Meat, Oatly, MeaTech and Else
Nutrition – much of the fundraising activity is being driven by private equity
and venture capital players.
Venture capital funds focused specifically on this segment
include the New Protein Fund by Big Idea Ventures, as well as Blue Horizon
Ventures and Stray Dog Capital.
Between 2010 and 2021, $11.1 billion was poured into
alternative protein companies – with nearly half that amount being deployed in
2021 alone, Murray said. She added that alternative proteins are increasingly
being recognized as a core part of climate technology.
A new report by Bain & Company, Microsoft, and
Singaporean investment giant Temasek shows that private equity and venture
capital firms are dominating the fledgling alternative protein market in Southeast
Asia.
In the fast-growing region, sovereign wealth funds and
pure-play green funds are focusing their sustainability efforts primarily on
renewable energy investments.
The study found that private equity and venture capital
groups have injected $1 billion into start-ups operating in Southeast Asia’s
burgeoning “green economy” since 2020. Of that amount, $557 million went into
start-ups producing plant-based foods and other alternative proteins, mainly in
Singapore.
One of those companies is Next Gen Foods, whose products
include chicken-alternative TiNDLE. The startup recently raised $100 million in
a Series A funding round backed by Indonesia’s Alpha JWC Ventures, London-based
MPL Ventures, California-headquartered GGV Capital, and Singapore-based Temasek
and EDBI.
The funding was earmarked for the company’s Singaporean
research and development center, which is currently under construction, and for
expansion into the US.
Andre Menezes, CEO and Co-Founder of Next Gen Foods,
said at the time: “The U.S. has long been a target market for us, and
thanks to our line-up of fantastic investors who have participated in this
funding round, this is only the beginning of our journey in delivering
delicious and sustainable foods to reverse our climate crisis.”
According to the report by Temasek and others, investors “are
optimistic, piggybacking on a mature market trend on alternative proteins.” Meat
alternatives are gaining momentum thanks to changing consumer habits and the
global push to reduce emissions.
Temasek and K3 Ventures have been amongst the most prolific
investors in Southeast Asia’s green economy, the report says.
Steve Howard, chief sustainability officer at the firm,
said: “The fight to keep global warming under 1.5°C has reached the critical
phase.
“Given the scale and urgency of the necessary transitions,
there is a need for government, corporations and investors to work together in
not only developing but accelerating sustainable solutions. The opportunities
are immense but unlocking them will take collective will and unprecedented
collaboration.”
In early June, Temasek launched GenZero, a S$5 billion (US$3.6
billion) investment platform that aims to accelerate decarbonization.