Hungry for Protein: Scaling the Next Generation of Protein

The protein on tomorrow’s plate may not come from a field, farm or fishing vessel. It could be produced by microorganisms in a fermentation tank or grown directly from animal cells.

This prospect is attracting attention for good reason. Demand for high-quality protein is increasing, while simply expanding conventional animal-based production would place further pressure on land use, natural resources and the climate. Certain alternative protein production pathways could help meet part of that demand with lower greenhouse gas emissions. However, their environmental performance varies considerably depending on the technology, production process, energy source, feedstock and conventional product being replaced. While the evidence is relatively well established for some plant-based alternatives, the environmental performance of emerging fermentation and cultivated meat technologies requires further assessment as production scales.

For alternative proteins to make a meaningful contribution to the future food system, they need to reach commercial scale. Achieving this requires reliable and consistent production processes, regulatory approvals, products that customers want to buy and the ability to attract appropriate capital. From Colesco Capital’s perspective as a private credit investor, the question is therefore not simply which technologies show scientific or environmental promise, but which can demonstrate environmental benefits while developing the characteristics required to reach commercial scale and ultimately become financeable.

More protein, with a lower climate footprint

Global protein demand is rising as the population grows and higher incomes change diets in many emerging economies. Rising consumption of meat, dairy, fish and other protein-rich foods is increasing both per-person and overall demand.[1]

At the same time, developed markets are placing greater emphasis on protein as a health and wellness attribute. Protein is increasingly associated with strength, weight management, healthy ageing and active lifestyles, extending demand beyond conventional foods into fortified products, snacks, drinks and supplements.[2]

Protein sources differ considerably in their resource requirements. Today, meat, dairy, and farmed fish provide around 38% of the global protein supply, while livestock farming, including grazing and feed production, accounts for about 80% of agricultural land use.[3]

Source: Our World in Data (2023)

The climate footprint of food production is also significant, with research estimating that the global food system is responsible for around one-third of greenhouse gas emissions.[4] Animal-based foods account for a large part of this footprint, although emissions vary considerably between different protein sources.

Against this backdrop, meeting rising protein demand simply by expanding conventional animal protein production could come with high environmental costs. This strengthens the case for diversifying protein production and investigating alternative pathways that can demonstrate lower emissions and more efficient resource use.

Research comparing alternative proteins with conventional meat points to the potential for significant reductions in greenhouse gas emissions. The evidence is particularly consistent for plant-based alternatives, while fermentation-based proteins can also offer important climate and land-use advantages.[5]

The picture is not identical across every technology. The climate footprint of fermentation can depend on factors including feedstocks and the energy used in production. Cultivated meat remains more uncertain because commercial-scale production is still developing and its energy requirements can be substantial.

The challenge is identifying which alternative protein production pathways can demonstrate meaningful environmental benefits while also achieving the production economics, scalability and consumer demand required for commercial viability.

Two innovative paths to producing protein

Alternative proteins encompass a wide range of approaches, including plant-based products. This article focuses on two pathways that illustrate both the opportunities and challenges of scaling novel protein production: fermentation and cell cultivation. Plant-based alternatives produced through processes such as extrusion or shear-cell technology are outside its scope.

Fermentation uses microorganisms such as bacteria, yeasts, or fungi to turn carbon-rich feedstocks into protein, but the technology has important variations.

In biomass fermentation, the microorganism itself becomes the protein-rich product. The desired protein forms part of the biomass and therefore does not generally need to be separated from the rest of the cell, which can result in relatively straightforward downstream processing such as dewatering and drying.

In precision fermentation, microorganisms act more like miniature production facilities, producing a specific targeted protein that is subsequently separated from the rest of the fermentation material and processed.

The distinction matters commercially. Biomass fermentation can produce protein-rich whole-cell products, whereas precision fermentation can produce specific proteins with particular properties. However, the latter’s greater processing complexity can affect production costs and regulatory approval.

Cell cultivation takes another route. Commonly associated with cultivated or lab-grown meat, it involves growing selected animal cells in a nutrient-rich medium and developing them into the desired tissue. In effect, part of the biological process that would ordinarily take place inside an animal moves into a controlled production environment.

Both approaches are advancing, but they are at different stages of technological and commercial development. Fermentation builds on long-established industrial processes, with many applications now moving towards commercial scale. Cultivated meat generally remains at an earlier stage of commercial development, because of considerable challenges around high production costs, process control, texture, regulation and consumer acceptance.

From a private credit perspective, these differences in technological maturity and commercial readiness are important. C4IF primarily focuses on fermentation businesses that can demonstrate technical and commercial progress, credible regulatory pathways and strong relationships across the value chain. These characteristics are important when assessing whether a business can develop a viable commercial model and ultimately support debt financing. Environmental performance must also be assessed on the merits of the specific production process, rather than assumed from the technology category alone.

The real challenge begins after the breakthrough

Producing protein successfully in a laboratory is an important scientific achievement. Turning that achievement into reliable and affordable industrial production is a different challenge altogether.

The first hurdle is technical. Producers need consistent feedstocks, efficient production processes and reliable downstream processing. Even relatively small inefficiencies might become commercially significant when production moves from pilot to industrial scale.

Regulatory and market readiness are equally as important. Alternative proteins must meet food-safety requirements, secure the necessary approvals and ultimately result in products customers want to buy. Taste, texture, price and consumer acceptance all influence whether a product can establish a commercially viable market.

Regulation can also materially affect how quickly businesses scale. In the European Union, certain alternative proteins fall within the Novel Food Regulation and require authorisation before they can be placed on the market. The European Food Safety Authority conducts scientific risk assessments as part of this process, while the EU regulatory framework makes authorisation decisions. Products involving genetically modified organisms may face additional requirements.

Companies must then finance the transition from laboratory and pilot production to commercial facilities. This stage can require significant capital before producers have demonstrated stable production volumes, competitive costs or predictable long-term revenues.

For investors and lenders, these factors cannot be assessed independently. A technically successful process may still be difficult to finance if regulatory approval is uncertain or customers are unwilling to commit to sufficient volumes. Equally, strong customer interest cannot compensate indefinitely for production economics that remain uncompetitive on a commercial scale.

Technical performance, regulation, customer demand, operational execution and financing therefore need to advance together.

This has an important implication for companies developing these technologies: bankability cannot be treated as something that comes after technical validation. It needs to be built alongside it.

As businesses move towards commercialisation, demonstrating production reliability, establishing a credible regulatory pathway, improving unit economics and developing customer relationships and offtake arrangements can all help reduce risk. The more these elements progress alongside the technology, the stronger the foundations for attracting the capital required for commercial scale-up.

Financing the move to industrial scale

Even when these elements begin to come together, businesses moving from demonstration to first commercial production can find themselves between traditional sources of capital.

They may need substantial investment to build and commission production facilities, but may not yet have the operating history, predictable cash flows, or established customer base that traditional lenders typically require.

Equity can absorb some of that risk, but financing industrial-scale facilities entirely through equity requires a relatively high valuation and comes at the cost of dilution. Appropriately structured private credit can potentially complement equity and other sources of capital, providing financing designed around the particular risks and timelines involved in commercial scale-up.

However, debt is not appropriate for every business or every stage of development. Its suitability depends on the maturity of the technology, the company’s financial position, the predictability of future cash flows and the risks associated with delivering its business plan.

For lenders, this requires looking beyond the technology itself. Due diligence needs to consider how the complete commercial proposition fits together: technology maturity and performance, feedstock availability, production economics, regulatory pathways, customer demand and offtake, management capability and the company’s ability to execute its scale-up plan.

Environmental considerations must form part of that assessment. Where a business seeks to deliver sustainability outcomes, investors need to understand how those outcomes will be measured, what assumptions underpin them and whether they remain credible as production scales.

The objective is ultimately to determine whether scientific and environmental potential can translate into a viable industrial business capable of supporting long-term capital.

For alternative proteins to become a meaningful part of the future food system, scientific innovation, environmental performance and commercial viability must progress together.

The challenge for investors is not simply identifying promising technologies, but understanding which businesses can turn that promise into reliable production, sustainable economics and ultimately financeable industrial operations.

[1] https://www.oecd.org/content/dam/oecd/en/publications/reports/2025/07/oecd-fao-agricultural-outlook-2025-2034_3eb15914/601276cd-en.pdf

[2] https://www.euromonitor.com/article/proteinmaxxing-and-the-future-of-protein-demand

[3] https://ourworldindata.org/global-land-for-agriculture

[4] https://www.nature.com/articles/s43016-021-00225-9

[5] https://www.nature.com/articles/s41538-025-00694-3