The headquarters of the Green Investment Bank will be based in Edinburgh after the Scottish capital saw off competition from 18 other cities.
The much-vaunted bank, which has cited waste as a priority investment sector, will also have a transaction team based in London.
Ministers said this arrangement would enable a greater commercial reach nationally than could be achieved from one location.
The bank is being set up with £3bn of public money to help firms finance early-stage renewable energy schemes.
Business Secretary Vince Cable said: “Harnessing the strengths of Edinburgh and London will support the Green Investment Bank’s ambition to become a world leader.
“Edinburgh has a thriving green sector and respected expertise in areas such as asset management. London, as the world’s leading financial centre, will ensure that the GIB’s transaction team can hit the ground running.
“This decision will allow the UKGIB to operate effectively and achieve its mission of mobilising the additional investment needed to accelerate the UK’s transition to a green economy.”
Environmental Services Association communications officer, Rid Hollands, said: “Whilst it is good news for Edinburgh that the Green Investment Bank (GIB) will be basing its headquarters in the Scottish capital, the function, not the location, of the Green Investment Bank is what is of chief interest to our members.
“Waste and resource management has been identified as a priority sector for the GIB and we look forward to working together to bring forward investment in new waste and recycling infrastructure.”