Green bonds worth $300 million that will fund environmentally-friendly projects in Victoria have been issued by the State Government, in what the Treasurer says is an Australian-first.

The bonds, which were snapped up by investors within a day of their release, are expected to finance and refinance government investment in energy efficiency, renewables, public transport and water treatment projects across the state.

"Green bonds are essentially bonds that ensure investments are made into carbon-reducing and environmentally-responsible [projects]," Treasurer Tim Pallas said.

"In a world first, the Victorian green bonds have the certification of the international climate bond federation that has assured Victoria .. and more importantly investors, that these green bonds are dedicated to purposes consistent with ethical investing strategies.

Bonds involve lending money to a government or company, with a promise it will be repaid at an agreed interest rate over a period of time.

The green bonds were issued for a five-year period, with a yield of 1.79 per cent.

"These green bonds were issued into the market and were fully subscribed in a little over 24 hours ... so it's pretty clear that there's a very substantial market for the bonds," Mr Pallas said.

Green bonds 'a growing market' for investment

Justin Lofting from the Treasury Corporation of Victoria (TCV) said the bonds had been released with ethical investors in mind.

"We had about seventeen different investors, all with basically green or ethical mandates, and that's why we targeted that market," he said.

"It is a growing market, it's a growing approach to investment as well.

"It actually attracts slightly different investors to TCV, so it diversifies our investor base."

Opposition treasury spokesman Michael O'Brien said the move was borrowing disguised as environmentalism.

"They're just simply about putting Victoria into more debt," he said.

"Daniel Andrews hasn't paid for his transport projects, he hasn't paid for Melbourne Metro.

"He's putting Victoria an extra $300 million into debt because of it, and he's trying to slap a green complexion on it."