The reason is that Catalina doesn't support 32-bit applications at all. You see this warning because the game has only 32 bit version and you won't be able to play it after update (and macOS encourages you to update it).
This is support article from Steam, they put these as possible workarounds:
Options to keep 32-bit Mac games playable on a Mac computer:
- Consider not upgrading to macOS 10.15 or above. By staying on macOS 10.14 Mojave or older you will ensure that your 32-bit apps are still playable on your Mac computer.
- After upgrading to macOS 10.15 Catalina, consider installing macOS 10.14 Mojave on a separate APFS volume on your computer along with Steam. This will allow you to flip over to macOS 10.14 on restart of your computer where you can continue to play all of your 32-bit Mac games. More information here.
- Use Bootcamp on Mac to launch your games in Windows on your Mac computer. More information about Bootcamp can be found here.