The pacemaker, the three-point seat belt and ultrasound — these life-altering inventions all originated in a country that 100 years ago was among Europe’s poorest. Today, Sweden is renowned for its culture of innovation, strong global brands, and a social system that encourages risk-taking and responsibility.  For investors seeking to make tech and sustainable investments, as well as for corporations and funds seeking to raise capital from sustainability-focused institutional investors — Sweden is a natural first pick.

Stockholm is Europe’s hottest unicorn city. Over the past few years, it has produced no less than five unicorn companies: Skype, Spotify, King, Mojang and Klarna. It is the world’s second most prolific tech hub on a per capita basis, behind only Silicon Valley. With a population of only 9.8 million people, Sweden pulls well over its weight, accounting for around 5% of all global BUSD tech exits in the past decade. In 2015, its tech industry attracted $1.1 billion in growth capital alone, making it number one in Europe, with 1.7 times more capital per capita then the UK, its closest contender at number 2. However, an increasing number of Swedish startups are finding it necessary to cross the Atlantic to secure access that’s sufficient to meet their capital needs. For investors who want to find tomorrow’s unicorns first, the answer is simple: go there.

This recent startup growth has not sprung from a vacuum. Sweden’s longstanding entrepreneurial climate, which fosters innovation and leadership, has delivered many multinational corporations, and a position as the world’s third most innovative economy. This can be attributed to Sweden’s heavy investments in R&D, with 3.3% of its GDP in R&D compared to the EU-wide 2020 target of 3%. It’s also an outcome of Sweden’s access to skilled labor built by its free education system, and the necessity for Swedish companies to look abroad for larger markets than its own small one from the outset.

The tech startup success can be attributed to the government’s heavy investments in tech infrastructure during the 1990s, which created a generation that grew up with access to computers and the Internet. Its subsidized childcare, parental leave policies, and the government’s role as a venture capitalistproviding both microenterprise loans and up to $15 million venture capital investmentshave enabled entrepreneurial risk-taking. As such, Sweden has established a sustainable, investment-friendly breeding ground for continuous innovation.

Swedish Companies Among the Most Sustainable

The innovative business climate, coupled with close ties between public and private entities, strong market incentives and stringent regulation, have also positioned Sweden as the world’s most sustainable country according to RobecoSAM, and one of the world’s most innovative environmental technology countries. Companies like Electrolux, H&M, MTG, SKF, Volvo and Sandvik are all listed as industry leaders in the Dow Jones Sustainability Index; and H&M, Atlas Copco, SEB, and Ericsson are all in the Global 100 Index, ranking among the world’s most sustainable corporations. Sweden established its position in the environmental vanguard in the 1960s, when it created the world’s first Environment Protection Agency, and it has kept this position by using market incentives to discourage environmentally harmful activities and to foster new technologies.

Cleantech and many of Sweden’s most innovative sustainable technologies are implemented in its several sustainable city districts. To name a few, Hammarby Sjöstad is a model for urban development projects around the world; Stockholm Royal Seaport is the world’s first city district to feature full-scale smart grids and was recently awarded the C40 Cities’ best sustainable urban development project; and Malmö’s Western Harbor is a carbon-neutral neighborhood. On a country level, Sweden aims to become the world’s first fossil fuel free nation by 2045. Investments of over $540 million are already committed for 2016 – but more is needed, opening up opportunities for foreign investors, especially within cleantech.

Institutional Investors Driving Change Through ESG Investing

While the Swedish tech start up industry is booming, the trend of social enterprises or impact investors is not growing at the same rate as in the United States, mainly due to the role of the welfare state as a reliable provider and payer of social services. However, there are some promising initiatives and this February, Leksell Social Ventures, founded by the co-founder of Elekta, the company revolutionizing surgery with the gamma knife, introduced Sweden’s first social impact bond addressing youth mental health.

Leading Swedish institutional investors committed to responsible investing are however a great potential source of financing for foreign corporations and funds. And Europe has a large lead over the United States in terms of ESG investing: almost 60% of European assets are invested in a sustainable way, compared with 18% in the United States. Swedish investors are at the forefront of developing standardized tools and investment products, and growing the asset base for responsible investing: from the bank SEB, which introduced the world’s first corporate Green Bond in 2007, to the Swedish AP pension funds, which have included ethical, social and environmental responsibility in their definition of fiduciary responsibility since 2000 and which are developing a publicly available standardized carbon emission reporting tool for all their portfolios.

Their campaigns include efforts to remove all environmental polluters in the S&P 500 index from portfolios; the development of MSCI Global Low Carbon Leaders Indexes; the blacklisting of Wal-Mart for violating the human rights of American workers, and being an anchor investor in Al Gore’s Generation Investment Management’s global credit fund. With $150 billion in assets under management and a continual and increasing focus on long-term, sustainable investments, they provide great opportunities for funds and corporations raising capital, including public and private equity as well as venture capital.

Similarly, earlier this year, the Swedish Investment Fund Association mandated that all its asset managers implement standardized ESG reporting guidelines, making it easier for investors and consumers to make informed decisions. This is in line with an increased demand for sustainable investment products among Swedish consumers, and 2015 saw an increasing trend of fund managers moving from negative screening to proactive screenings of entities leading the charge in sustainability. In Europe’s leading unicorn and tech hub, consumers, companies, investors and the government all play a role in creating a resilient innovative ecosystem. Look no further for a highly competitive, inclusive model for sustainable capitalism.

Vivianne Gillman is Sweden’s Trade Commissioner in Southeast Asia. She has worked in an IT startup, as a Sustainability Director, and as a Strategy Consultant in a variety of industries.

Maria Mähl  is a Senior Manager with the Clinton Global Initiative. She curates the Clinton Global Initiative Annual Meeting working on issues such as health, climate change, energy, education, infrastructure, tech and economic development, with a special focus on sustainable finance and impact investing. Prior to the Clinton Foundation, Maria worked in Sweden at Volvo, Health Navigator and Capgemini Consulting. All views are her own.