With the “language of development”, we describe not only the goals and principles of EU regional policy, but also concrete answers to practical questions: where funding for territorial development and innovation comes from; which instruments translate strategic objectives of cohesion policy into real action on the ground; who can receive financing and under what rules; how results are measured and what is considered “success” for a community or region.

That is why the second part of the narrative glossary of EU cohesion policy focuses on the funds and instruments of cohesion policy. After the first part addressed the foundational terms of the EU’s approach to reducing disparities between regions and the guiding principles, this part deals with the financial “grammar” of cohesion policy: how the financial architecture is structured, what the difference is between funds and programmes, and an overview of the main cohesion policy funds.

For Ukraine, this knowledge is not theoretical. Our recovery and reforms for EU integration are increasingly being aligned in a format that is understandable to European institutions: with objectives, indicators, types of interventions, and sources of financing. Understanding the logic of EU funds, programmes, and financial instruments helps to match the right support mechanism to a community’s needs more precisely, formulate a project correctly, and pass evaluation against the criteria used by donors and partners. And in the perspective of EU membership, it is also preparation for the role of a full participant in cohesion policy, where it is important not only to receive resources, but to be able to manage them and influence priorities.

The authors did not aim to cover everything. This is not an encyclopedia and not an official document. Instead, the Swiss–Ukrainian project UCORD, in cooperation with the European Association of Development Agencies (EURADA) and the Decentralization portal, did something different: they selected the most important cohesion policy terms and explained them not in isolation, but in relation to one another.

The contents of this publication are the sole responsibility of the author(s) and do not necessarily reflect the views of the Swiss Agency for Development and Cooperation, or NIRAS Sweden AB.

Funds and Instruments of Cohesion policy

Cohesion policy would not be possible without the financial instruments that turn strategic objectives into real action on the ground. Implementation is reached through a range of EU funds, programmes, and tools. Together, these create a complex financial framework that channels resources where they are most needed.

The core of Cohesion policy funding is outlined in the Common Provisions Regulation (CPR) (Regulation (EU) 2021/1060), which establishes the standard financial rules for several European Structural and Investment Funds (ESIF). Of those, the following funds are directly dedicated to cohesion objectives:

• The European Regional Development Fund (ERDF) was created in 1975 and now supports all 5 Cohesion policy priorities. It funds projects and initiatives that strengthen regional economies, enhance competitiveness, support innovation and digitalisation, improve infrastructure and connectivity, and promote sustainable, low-carbon development across EU regions.

The ERDF finances programmes by the principle of shared management between the European Commission and national and regional authorities in Member States. The Member States choose which projects to finance and take responsibility for day-to-day management.

With ERDF, an initial allocation of EUR 306.4 billion is available for programming from 2021 to 2027, of which 30% is national co-financing by the Member States. The Cohesion Data resource provides live data on planned and implemented finance, as well as the contributions of Member States.

• The European Social Fund (ESF+), established at the dawn of the EU in 1957, is the EU's primary instrument for investing in people by supporting the fourth objective of Cohesion policy: a more social and inclusive Europe.

ESF+ funds initiatives for labor market access, lifelong learning, education modernization (including vocational), and improved access to childcare and healthcare, while also supporting gender equality, youth employment, and equal opportunities for disadvantaged groups.

Support under the ESF+ is mainly delivered within the shared management principle; however, for the Employment and Social Innovation (EaSI) strand, it is implemented under direct management.

The total allocation for ESF+ from 2021 to 2027, according to Cohesion Data, is EUR 141.3 billion, of which 32.8% is national co-financing by the Member States.

• The Cohesion Fund (CF), established in 1994, targets Member States with a gross national income (GNI) per capita below 90% of the EU average, supporting the third and fourth priorities of Cohesion policy: a greener and more connected Europe.

CF focuses on investments in environmental sustainability and trans-European transport networks (TEN-T), financing large-scale projects such as renewable energy infrastructure, sustainable urban mobility, water and waste management systems, and cross-border transport links.

The Member States eligible to receive support from the Cohesion Fund are determined for each programming period based on their GNI per inhabitant. CF, too, finances programmes by the principle of shared management between the European Commission and national and regional authorities in Member States.

The total allocation for CF in 2021 to 2027 is EUR 49.2 billion, according to Cohesion Data. Of those, 20,6% is national co-financing by the Member States.

Following the three core funds of Cohesion policy, several complementary instruments and mechanisms further strengthen the EU's ability to address structural challenges and support long-term development.

• The Just Transition Fund (JTF), established in 2021, is the EU's new instrument under the Cohesion policy and the first pillar of the Just Transition Mechanism, developed to ensure that the transition towards a climate-neutral economy occurs in a fair manner, leaving no one behind. The JTF focuses on territories most affected by this transition, helping them diversify their economies, reskill their workforce, and invest in new industries. In doing so, it aims to reduce disparities between regions with different levels of dependence on fossil fuels or carbon-intensive sectors. For the 2021–2027 period, the JTF has a total budget of EUR 26.5 billion, with 25.7% of the funding provided through national co-financing by Member States.

Another essential cohesion instrument is Interreg, the EU's main initiative for territorial cooperation. Created in 1990, Interreg 'connects countries, regions and communities through a series of funding programmes promoting cross-border, transnational, interregional and outermost regions cooperation. By supporting projects that tackle shared challenges and deliver sustainable solutions, Interreg addresses regional inequalities while fostering economic, social, and environmental development across Europe.

Interreg programs, structured into four strands, facilitate cross-border cooperation by co-funding shared solutions to common challenges:

• Cross-border cooperation (Interreg A): supporting cooperation between regions along internal EU borders.
• Transnational cooperation (Interreg B): enabling collaboration across larger transnational territories such as the Danube or Baltic Sea regions.
• Interregional cooperation (Interreg C): facilitating the exchange of experiences and best practices across all EU regions.
• Cooperation with third countries (Interreg D): strengthening collaboration with neighbouring non-EU regions.

In practice, it means that Interreg provides precise funding mechanisms and project types, enabling regions across the EU and beyond to develop partnerships to address common challenges in diverse policy areas. These include environmental protection, climate adaptation, transport, innovation, and cross-border public services. Currently, seven Interreg programs are active with Ukraine. More information is available on keep.eu, the aggregator of data regarding projects and beneficiaries of EU cross-border, transnational, and interregional cooperation programs.

Some other mechanisms connected to Cohesion policy are:

The Recovery and Resilience Facility (RRF), the core of NextGenerationEU, is a temporary instrument that allows the Commission to raise funds for Member States' reforms and investments, including the implementation of the REPowerEU plan in response to Russia's invasion of Ukraine.

As part of NextGenerationEU and the second pillar of the Just Transition Mechanism, InvestEU is an EU investment programme designed to mobilise public and private financing for key policy priorities: sustainable infrastructure, research, innovation, and digitisation; small and medium-sized enterprises; and social investment and skills. These four areas overlap with those of European Structural and Investment Funds of the Cohesion policy; however, InvestEU is separate from traditional CP funds and offers a different approach to financing. The financial framework of InvestEU enables Member States to allocate part of their cohesion funds to it, thereby leveraging additional investment. The EU utilizes budget guarantees to mitigate investment risk, attract private capital, and stimulate regional development.

At the same time, alongside current strategic development goals, the unprecedented challenges posed by the COVID-19 pandemic and the Russian full-scale invasion of Ukraine spurred significant innovation in funding regulations, enabling Cohesion policy to swiftly adapt and respond to these crises.

As one of the most extensive programs under the Next Generation EU instrument, the Recovery Assistance for Cohesion and the Territories of Europe, REACT-EU was designed to address the social and economic damage caused by the COVID-19 pandemic and to prepare for a green, digital, and resilient recovery. The key approach of the programme, launched in 2020, was to target areas, not just regions, in most need while also using the partnership principle of the Cohesion policy and mobilizing additional resources from ESIF. This increased the total envelope of the Structural and Investment Funds above previous levels and positioned REACT-EU as the highest single-policy grant instrument in the EU budget. The programme was finalised in 2023.

The EU Solidarity Fund is the primary EU instrument for supporting recovery from natural disasters and significant public health emergencies, such as the COVID-19 pandemic, acting as an expression of EU solidarity. According to the newly adopted Regional Emergency Support to Reconstruction (RESTORE) Regulation, Member States can reprogram funds from the ERDF, the CF, and the ESF+ to cover measures such as repairing infrastructure and providing basic materials and social/healthcare support. The RESTORE Regulation, utilizing ERDF and ESF+ funds, complements the resources available from the EU Solidarity Fund.

Cohesion policy funds have also been instrumental in responding to the humanitarian consequences of the russian invasion. In particular, the 2014-2020 Cohesion policy rules were made flexible to enable a quick reallocation of available funds for emergency support through the Cohesion Action for Refugees in Europe (CARE). It was implemented with retrospective eligibility, 100% financing for an additional accounting year, cross-financing between ESF+ and ERDF, increased pre-financing from REACT-EU, and a simplified unit cost declaration mechanism for refugees. Such flexibility demonstrated the CP's capacity to evolve within and beyond its scope, positioning cohesion funding as a strategic tool for rapid crisis response and solidarity in the face of geopolitical shocks.

Additionally, the European Investment Bank (EIB) and the European Investment Fund (EIF) play a crucial role, complementing grant-based instruments by providing loans, guarantees, equity, and advisory services. Its mission within this framework is to reduce regional disparities and promote balanced economic, social, and territorial development, which directly aligns with EU cohesion objectives.

The EIB provides long-term loans and blended finance, focusing on less developed, transition, and border regions with limited capital access. It often complements the ERDF, ESF+, and Cohesion Fund to boost resources for regional development, support large infrastructure projects, and leverage private investment. Through blending instruments and advisory services, such as JASPERS, the EIB maximizes impact and project feasibility, aligning with EU cohesion priorities, including climate action, digital transformation, SME competitiveness, and social infrastructure. Via the EIF, it channels cohesion-linked financing to SMEs and start-ups, improving access to finance and creating jobs.

Some other instruments worth mentioning are the Public Sector Loan Facility (PSLF), the third pillar of the Just Transition Mechanism, which leverages public financing to support projects that do not generate a sufficient stream of revenues to cover their investment costs; Integrated Territorial Investment (ITI) which is a flexible funding tool supporting territorial development strategies based on integrated, place-based approaches, and which require combining funding streams and resources from multiple ESIF; and Community-led Local Development (CLLD), a tool designed explicitly for sub-regional use, complementing other forms of local development support, to enable use of funding in a connected and integrated manner to implement regional development strategies.

The final essential concepts are related to innovation:

Interregional Innovation Investments (I3) is a funding instrument under the ERDF, proposed for the 2021-2017 programming period, and designed to turn regional innovation potential into cross-border economic impact. I3 does this by funding collaborative projects that build on smart specialisation priorities, connect innovation ecosystems across Europe, and develop new European value chains — ultimately helping research results reach the market, scaling up businesses, and strengthening regional competitiveness within the single market.

Building on the collaborative approach of I3, Smart Specialisation Strategies (S3) provide the strategic foundation for how regions design and prioritise their innovation policies. Introduced by the European Commission in 2010, S3 marked a turning point in EU regional development by mainstreaming research and innovation as tools for economic transformation. At its core, smart specialisation helps territories identify their unique strengths and competitive advantages, focusing resources on areas where they can excel, thereby supporting the EU's broader objectives of a green and digital transition.

S3 is built on three key principles: localisation, by anchoring strategies in the specific assets and resources of a territory; prioritisation, by concentrating investment on a limited number of strategic areas; and participation, by engaging actors from government, business, research, and civil society throughout the strategy cycle.

Good governance is also essential, with the 2021-2027 period introducing clear criteria for institutional capacity, monitoring, cooperation, and system improvements. More than a decade after its introduction, smart specialisation has fundamentally reshaped how European regions approach innovation, strengthening cross-sector collaboration and transforming local potential into drivers of sustainable growth.