TLDR: To run an AppImage, a SUID-root binary fusermount is required; the Flatpak sandbox doesn't allow this.
Feature request for adding a secure way to use FUSE in flatpak sandbox: flatpak/xdg-desktop-portal#695

Original issue:
Game information
Retroarch - Steam Version

Distribution name and version where applicable
Linux Mint 19.3 Cinnamon

Flatpak info
Flatpak version: Flatpak 1.11.1
flatpak --gl-drivers: default host

Problem description
The Steam Flatpak version is no able to launch Retroarch, which is available in steam as an Appimage

Does this issue reproduce with native Steam
No, in native steam works as expected