The Government has bankrolled a $100 million green investment fund which aims to invest with businesses to reduce emissions while also helping them make a profit.

Climate Minister James Shaw said an increasing number of investors were looking to fund clean, sustainable ventures. The Government's $100 million start-up capital injection will help achieve this, he said.

"New Zealand faces a big job in upgrading our economy and infrastructure. New Zealand Green Investment Finance will help deliver financial backing to help ensure that the upgrade is fit for purpose," Shaw said.

The fund was one of the conditions of the Labour/Greens confidence and supply agreement and $100 million was set aside for the project in the Budget.

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Although the $100 won't need to be paid back, the operating capital of $25 million over five years would be paid back as the fund matures.

"This fund means the Government is bringing cash and know-how to the table to partner with business to deliver a clean, green future for everyone," Prime Minister Jacinda Ardern said.

She added that is an important component of New Zealand's plan to build a clean, sustainable, low-carbon economy that has both lower emissions and profitable enterprises.

Speaking at the fund's launch this afternoon, Shaw said the fund could, for example, arrange for business borrowers to repay energy efficiency investments directly through savings to their energy bills.

He said the Government had been approached by potential investors interested in the fund, but did not give specifics.

"This fund will bring financial and technical emissions reductions and expertise together with the sole aim of increasing investment in low emissions projects."

This would not be the world's first green investment fund – Shaw said there are other similar projects overseas doing the same thing.

For example, Australia's green fund invested in a company that converts medium-duty trucks and vans into electric vehicles.

The $100 million start-up capital will act as a bridge between investors and key industries and sectors, as well as identifying low emission projects ready for upscaling, commercialisation and use.

Shaw said returns on the funding projects over the coming years are expected to pay back the Government's initial investment.

It is expected the fund would stand on its own commercial footing in subsequent years.

The fund was established because new investment markets take time to develop and investors rely on good information to assess viability and risk, Shaw said.

They also need financial products which are structured in a way that fits the market.

As a result, there is limited activity initiating and funding low emissions or 'green' investment deals in New Zealand.

Shaw said the Green Investment Fund would help fill this gap.

Government Superannuation Fund Authority chairwoman Cecilia Tarrant will chair the fund and David Woods and Rob Fenwick will be on its board.

But, as it is an investment fund, Shaw said it is likely that some of the projects funded through the fund won't work out.

"The idea is we want to have a portfolio return, but of course this is the nature of the beast in that there is an element of risk at play."

Shaw said the first investment is likely to be made by the second half of next year.

But not everyone is a fan of the fund – Act Leader David Seymour called it "greenwashing".

"If the Government and the Green Party were serious in their views about climate change they would whack a big carbon tax on New Zealanders or change the Emissions Trading Scheme."

The Taxpayers' Union said private businesses already have strong incentives to increase efficiency and to improve their brands with environmentally-friendly practices.

It criticised the spending on the fund.