Foresight Group will manage the new fund, Recycling and Waste (RAW), which intends to raise a further £50m from the private sector.
The fund, which already has a broad pipeline in place, was unveiled by UK Business Minister Matthew Hancock during a visit to the £47m Birmingham BioPower project, currently under construction in Tyseley.
Once operational, the project will divert up to 67,000 tonnes of recovered wood from landfill a year. JM Envirofuels will supply the recovered wood.
Hancock said: This investment by the Green Investment Bank will be used to fund biopower projects that will put the UK at the forefront of this innovative green technology, turning local waste wood to electricity.
"This state of the art plant in Birmingham will be the first of its kind in the UK. It uses a new type of gasification system and will not only power 17,000 homes and recycle waste more efficiently but will also boost the local economy and create 100 local jobs."
GIB chief executive Shaun Kingsbury said: "This new facility is a great example of the modern, advanced-technology infrastructure we need to see across the UK. It’s the first time this technology will be used in the UK and the investment will benefit the local economy, with a local small business supplying the plant with wood that would have otherwise gone to landfill."
The new fund will be GIB’s second investment in a Foresight managed fund.
It follows the bank’s investment in the first fund, UK Waste Resources and Energy Investments (UKWREI), which has committed its initial funding ahead of schedule, backing seven new waste and recycling projects.
