AQUACERTA Challenge: Boosting Water Sector Innovation by IDB Lab

About this initiative

The Inter-American Development Bank (IDB), through its innovation laboratory, IDB Lab, in coordination with the IDB Water and Sanitation Division and in partnership with the members of Source of Innovation seeks to advance solutions and innovations from the private sector that can be adopted by service providers in Latin America and the Caribbean to assure safely managed drinking water and the resilience of water systems.

Source of Innovation is an alliance of the IDB Group with external partners to promote the development and adoption of innovative solutions in the water, sanitation, and solid waste sectors to achieve smart, inclusive, and sustainable services, with a focus on service providers in Latin America and the Caribbean. Source of Innovation is funded by the Government of Switzerland, through its Secretariat of State for Economic Affairs (SECO), by the FEMSA Foundation, by the Republic of Korea, through its Ministry of the Environment, by The Coca-Cola Foundation, the Government of Spain, through its Ministry of Economy, Trade and Business (MINECO), and by the Government of Israel, through its Ministry of Finance. The alliance is also complemented by direct contributions from IDB Lab and the Water and Sanitation Division of the IDB, and coordinates directly with the Aquafund, the fund created with IDB capital and to which a wide range of public and private sector partners contribute.

This challenge will focus on strengthening the supply of sectoral innovation from the region by identifying and supporting innovative solutions and products developed by the private sector

 Why are we launching this call?

According to the latest statistics, only 75% of the population in Latin America and the Caribbean (LAC) had access to safely managed drinking water services in 2020 and only 33% to safely managed sanitation services. Moreover, the quality of these services presents important challenges. For example, 60% of systems fail to offer continuous service and non-revenue water is around 45% and 50%.

The sector must adopt and incorporate innovative solutions and models that allow accelerating access to safe drinking water, sanitation, and solid waste services. The needs in the water and sanitation and hygiene (WASH) sector are becoming increasingly demanding, which means utilities need to increase efficiency, do more with less, increase transparency and creditworthiness, and ensure the sustainability of services. In a context of climate change and water insecurity, aspects such as energy efficiency and non-revenue water become key to ensure services to everyone during draughts, which are becoming more common in the region as shown by the crises of the megacity of São Paulo or the water shortages in Chile, Bolivia, and Peru, which have contributed to social unrest in these countries.

 In particular, the technological digital transformation of systems and processes can result in a reduction in operating expenses of up to 25% for utilities and thus create new economic opportunities to increase access and quality to safe water and sanitation for the population in LAC and the modernization of existing sectoral infrastructure. It is expected that 80% and 50% of water utilities in developed and developing countries, respectively, will have implemented a digital transition by 2025 covering three major aspects: (i) infrastructure management and the operation of service provision; (ii) customer management, and (iii) personnel management including training.

This potential demand for the transformation of the water and sanitation sector is not answered today with an offer of technology providers from the same region. Not many innovative entrepreneurs are interested in the sector and those who offer systems, services, and technological products for the water and sanitation sector require a systematic and expensive effort to be able to present the solutions to the different actors and decision-makers in the sector. The few entities focused on this connection work concentrate on solutions from outside our region.

Funding will be exclusively allocated to projects aimed at enhancing water and sanitation services that can be adopted by service providers. While various entities (startups, SMEs) might be involved in developing water-oriented solutions for sectors like agriculture and industry, our focus is on water and sanitation service improvements. Only entities with solutions an projects focused on water and sanitation service providers (such as public or private water utilities, municipalities, regulatory bodies, and national water and sanitation service programs) or those aiming to showcase verifiable advancements, technological innovations, or business models tailored for these service providers will qualify. Projects with primary objectives outside of this domain will not receive financing.

What are the awards for the selected proposals?

Applicants can present their applications and apply for contingent recovery financing (that means that the financing is reimbursable upon meeting certain requirements) from US$300,000, to a maximum of US$500,000 each. Resources will be channeled through individual projects to be approved by IDB Lab. All individual projects will have to comply with the eligibility criteria. 

Contingent recovery financing is an instrument in which the financing is reimbursable upon meeting certain target(s) specific to the project. Repayment will occur when certain target(s) are achieved. This target(s) is (are) linked to revenue or operating performance and business growth, in a way that allows IDB Lab to recover the investment in case the innovation achieves market success. Reimbursement conditions are to be agreed upon during due diligence. Please note that:

• Applicants should be able to contribute at least 50% in counterpart funds for the project budget (IDB Lab 50% + Applicant 50% = 100% Total project cost). At least 50% of the counterpart should be cash.
• After a due diligence process, IDB Lab may propose a different financial instrument from the one offered through this challenge.

Financing: IDB Lab may consider the applicants whose proposals are selected to receive financing to implement the proposed project in one or various of the 26 target countries: Argentina, Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay, and Venezuela.

IDB Lab Innovators Network: Selected applicants will be included among IDB Lab's network of global innovators working in LAC to exchange knowledge, experiences, and best practices, and may have opportunities to participate in networking events organized by the IDB Group and its partners.

What are we looking for?

IDB Lab is looking to support private sector entities:  startups, Small and Medium Enterprises (SMEs), and Social Businesses (i.e., B corporations), with business models "ready to implement". The entity must propose a specific project that supports the strengthening of the supply of innovation for the sector in any of the following areas:

• Energy efficiency for the water and sanitation sector
• Non-revenue water
• Water quality
• Management of systems related to water and sanitation services (incl. services management, information management, and interaction with users)
• Environmental sustainability and resilience of services (incl. water availability for drinking water, quality of water bodies, planning, etc.)

The proposed projects must demonstrate that they contribute to the following indicators:

1. Reduce water loss (non-revenue water).
2. Improve water quality.
3. Increase sustainability (operational, environmental, or financial) of water and sanitation services.
4. Increase resilience (operational, environmental, or financial) of water and sanitation services.
5. Reduce volumes of untreated wastewater.
6. Reduce pollution of water sources.
7. GHG emissions avoided (this indicator cannot go alone and requires contribution to another indicator from this list).