The Green Investment Bank (GIB) is investing £2 million in sewage heat recovery systems across Scotland.
It will be the first time the technology will be deployed in the UK.
The investment is GIB’s 50th transaction since its formation in 2012.
The Equitix-managed fund, Energy Savings Investments (ESI), is investing £2m in the project.
The pilot project will see heat extracted from waste water intercepted from Scottish Water’s Galashiels network.
The heat will then be sold to Borders College under a 20-year power purchase agreement resulting in energy and cost savings and a reduction in carbon emissions.
Installation of the system is scheduled to start later this month and completed by the end of the summer.
Lord Smith of Kelvin, Chairman, UK Green Investment Bank, said: “We are backing the deployment of innovative new technology across the UK to produce renewable energy, cut energy use, cut costs and improve the UK’s green performance.”