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Perfect Day creates products with vegan and lactose-free dairy proteins that look and taste like milk.

Courtesy of manufacturer

The Canada Pension Plan Investment Board (CPPIB) has marked the beginning of its thematic push toward climate change opportunities by investing $50-million in animal-free dairy maker Perfect Day.

The recent investment adds to Perfect Day’s latest funding round, which initially closed late last year at $140-million. CPPIB’s investment, alongside contributions from venture capital firms that include Temasek Holdings Private Ltd. and Horizons Ventures Ltd., expanded this latest funding round to $300-million.

Under its thematic investment strategy, CPPIB is aiming to invest in companies that are well positioned to “have some of the solutions that work to mitigate the problem” of climate change, said Leon Pedersen, CPPIB’s head of thematic investing. Perfect Day says its methods use less energy and water than dairy products sourced from animals, and produce fewer greenhouse gas emissions.

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Perfect Day uses fermentation in microflora to create a vegan and lactose-free dairy protein that can be used as a base for ice cream, cheese and other traditional dairy products, but doesn’t use any animals in the process.

The six-year-old San Francisco Bay Area startup recently doubled its capacity to produce its flora-made protein and was granted Generally Recognized As Safe (GRAS) status by the U.S. Food and Drug Administration.

Mr. Pedersen said CPPIB chose Perfect Day in part because it is using fermentation, a method traditionally used to make other products such as vitamins and beer, and moving it across industry barriers to create a new product.

Company co-founders Ryan Pandya and Perumal Gandhi both have engineering backgrounds and said they wanted to create a dairy product with the same flavour and texture of the animal-sourced protein.

“Both of us kind of arrived at the same idea around the same time that if you could figure out what makes milk milk from a food functionality and nutrition perspective, maybe you’d be able to make a much better suite of alternatives for these different products,” Mr. Pandya said. “And that’s exactly what we’ve been able to do.”

The company has raised more than US$360-million so far and is aiming to become a supplier to larger food companies, allowing it to increase its scale and become profitable more quickly.

“We feel a better way to make a lot of impact and, as it turns out, make a fantastic financial return as well, is by actually leveraging the scale and distribution and might of these large companies,” Mr. Pandya said.

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Two of Perfect Day’s biggest investors, Temasek Holdings and Horizons Ventures, are long-time investors in food technology, having backed notable names such as California-based Impossible Foods Inc., which produces plant-based alternatives to meat products.

“Our thesis when it comes to investors is we want groups that can scale, that have a long-term view on things and investors that’ll legitimately help the company grow and are not just looking for a return,” Mr. Gandhi said.

Mr. Pedersen said CPPIB wants to invest in 15 to 20 companies under the theme of climate change opportunities. About one-third of these investments are expected to be private firms; the remainder will be in publicly traded companies, he said. The investments will be focused across three main categories: green consumerism, building materials and transportation.

As companies in those categories mature and become economically viable, sectors that aim to address climate change are approaching an “inflection point” where new business models will begin to take off, Mr. Pedersen said.

“We see this is going to have very strong structural growth for the next many decades,” he said.

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