This thesis investigates the integration of environmental, social, and governance (ESG) considerations into traditional asset pricing models within the Nordic equity markets. Motivated by the increasing prominence of sustainable investing and the ongoing debate regarding ESG's role as a priced risk factor, this study aims to assess whether the Fama-French five-factor model sufficiently captures ESG-related risks or if ESG represents an independent dimension of systematic risk. Using firm-level data from Finland, Sweden, Norway, and Denmark over the period 2011 to 2023, the study constructs region-specific Fama-French and ESG factor portfolios and applies a two-stage Fama-MacBeth regression framework, incorporating errors in-variables correction and Gibbons-Ross-Shanken (GRS) testing. The empirical results provide no evidence that ESG exposures constitute a priced systematic risk factor. Instead, the findings indicate that ESG effects are predominantly driven by firm-specific characteristics, with higher ESG scores associated with marginally lower expected returns. These results suggest that investor preferences for sustainability are reflected in return patterns, but traditional asset pricing models remain sufficient in capturing systematic risks in the Nordic markets. The thesis contributes to the literature by offering regionally tailored evidence on ESG integration into factor models and highlights the need for investors to distinguish between systematic ESG risk exposures and non-risk-based ESG preferences. These insights provide practical guidance for asset managers in aligning ESG strategies with client objectives while managing expectations around financial performance.