The portfolio includes wind, solar and water infrastructure assets in seven countries that are operating or under development.
The two funds will create a company with Banco Santander that will equally divide ownership of the assets.
The transaction, which is subject to regulatory approvals, is expected to be completed in the first half of 2015.
Marcos Sebares, CEO of the new entity, said: "A combination of Santander, which has consistently been voted the greenest bank in the world, and two investors, such as PSP Investments and Teachers’, who have a long history of sustainable investing, marks the beginning of a new phase in the development of our company into one of the world’s leading renewable energy investment companies.
"We have a strong balance sheet and long term investment strategy, with a mandate from shareholders to grow the new company over the next five years."
Banco Santander’s sale was led by its Asset & Capital Structuring team of 30 people, who will manage the acquired portfolio and lead investments in the new worldwide renewable energy and water platform.
