For over 20 years, financial instruments (FI) have been used to deliver Cohesion Policy priorities related to SME support, investments in a low-carbon economy, research, innovation and territorial development.
In the 2021-2027 programming period, almost EUR 18.5 billion (constant prices) from the EU budget is allocated under Cohesion Policy to financial instruments, representing around 6% of the total resources of ERDF, CF and ESF+.
Member States authorities use the ERDF/CF, ESF+ and JTF financial instruments for revenue generating and cost-saving investments, with the aim of mobilising public and private investments in a smarter, greener, more connected and social Europe. 

The volume of financial instruments varies by fund 

ERDF-supported financial instruments mark the highest share compared to ESF+, JTF and CF, aiming at strengthening economic and social cohesion in the European Union. ERDF support through financial instruments exists since 2000-2006 and significantly rose during the 2014-2020 programming period. In 2021-2027, FIs will deliver Cohesion Policy in 22 Member States for a global amount of EUR 17.3 billion of ERDF allocations. This amount is to be supplemented by EUR 505 million Cohesion Fund allocations for FIs.
The ESF+ managing authorities plan to implement financial instruments in 9 Member States for a global amount of EUR 684 million. 
FI allocations under the JTF amount to EUR 600 million, planned in 9 Member States, signifying a positive uptake in areas where the set-up of FIs in general is challenging.
Tip: use the filter to see the breakdown of financial instrument types by Member State and/or specific objective.

ERDF/CF Financial instruments are present in a number of investment areas

Almost half of the 2021-2027 financial instruments will support SME investments. Nearly EUR 8.5 billion will be invested in SMEs in the form of loans (49%) or equity (20%) with the aim of improving access to finance, which is still a hurdle for many start-ups and growing businesses.
Support via financial instruments for investments in research and innovation (EUR 1.7 billion) and digitisation (EUR 417 million) also contributes to delivering on the Smarter Europe priority.
24% of the planned allocations for financial instruments are for investments in energy efficiency (EUR 4.3 billion) and 8 % are for renewable energy (EUR 1.5 billion). Totaling almost EUR 6 billion, - double that of the investments made in 2014-2020 - this will be allocated to cover investment gaps in the energy transition and low-carbon economy, sectors crucial for the success of the European Green Deal.
There are also important commitments to deliver on urban and territorial development using financial instruments (EUR 633 million). This can be done through the New European Bauhaus model for financial instruments.
Tip: use the filter to see how specific objectives targeted by financial instruments (under ERDF) vary by Member State.

Financial instruments under European Social Fund (ESF+)

The majority of ESF+ financial instruments are providing loans (EUR 478 million).
Most resources are allocated to the investment priority ‘Access to employment and activation measures for all’. In addition, over EUR 50 million is planned for ‘Lifelong learning’ and ‘career transitions’ as well as ‘active inclusion and employability’.

Financial instruments types of products

Financial instruments include a range of repayable financial support delivered through investment funds (portfolios), often run by financial institutions.
Mainly financial instruments deliver loans, equity and provide guarantees.
Loans continue to represent the highest share of financial instruments, making up 53% of all commitments. 21% of the allocations for financial instruments are planned to be delivered through grants in combination with financial instruments in one operation.

Financial instruments use by Member State

Poland allocated not only the most important volume, but also the biggest number of FIs implemented, as a result of its long experience and leadership of the national promotional institution. Along with the continuous support for small and medium enterprises (SME) through FIs, Poland also has high FI allocations in the areas of energy efficiency and renewable energy.  
Italy, supported by a well-functioning banking system, has historically been the top contributor of FIs and is therefore also a leader in allocations.
Romania will not only continue to support SMEs via financial instruments, but also committed its first ERDF allocations for expanding the use of financial instruments combined with grants to other sectors such as energy efficiency, urban/rural development, culture and the sustainable tourism sector.
Tip: use the filter to zoom in on the forms of financial instrument support in a specific country or objective.

Comparison: 2021-2027 vs 2014-2020 (ERDF and CF)

For 2021-2027, more than EUR 17.8 billion (constant prices) from the EU budget is allocated under the ERDF and CF to financial instruments, representing around 7.3% of the ERDF and CF. This is more than in 2014-2020, when EUR 16.7 billion or 6.7% was allocated*.
In addition, 2014-2020 FI allocations rose due to very high increase in SME support through loans and guarantees in many Member States linked to the COVID response measures. Between 2019 and 2020, ERDF provided more than 2 billion new investments in working capital for SMEs**.
Funds repaid under 2014-2020 instruments have also become available to be reused by the fund managers (i.e. revolving funds). 

*Situation as of 31st December 2018 (Annual Summaries of 2018) pre COVID response and without UK allocations for comparison reasons, ERDF +CF.
** Data as per Annual Summaries 2019 and 2020.

Source: Annual Summaries situation as of 31 December 2018 (ERDF+CF, without UK) and 2021-2027 Finances planned details

Supporting take up and implementation

The European Commission assists Member States with implementing financial instruments in their programmes. Fi-compass, a platform for advisory services on financial instruments under EU shared management, is a collaboration between the European Commission and the European Investment Bank. Through this partnership, the Commission designed and launched three models for financial instruments in 2022 on 1) New European Bauhaus, 2) Energy Efficiency and 3) Quasi-Equity. These models aim to provide managing authorities who implement Cohesion Policy programmes with the building blocks to set up and implement financial instruments based on the 2021-2027 legislation.

More information 

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Authors: Radka Encheva KONSTANTINOVA, Barbara KOCZARA-JOLIE, Dora O'NEILL
Data of Text: April 2023