Despite their increasing importance in worldwide investment plans and the key role played by the Chinese economy in the green transition worldwide, the asset pricing role of Environmental, Social, and Governance (ESG) factors in Chinese asset markets and the implications for optimal portfolio management are still understudied. This work addresses this gap by constructing an ESG-factor-mimicking portfolio and adding it as a risk factor to the traditional Fama-French three-factor model, thereby creating a four-factor risk factor pricing model for the Chinese stock market. We systematically investigate the explanatory ability of the model by building size-value and size-ESG investment portfolios. Including the ESG factor not only improves the model's capacity to account for cross-sectional variation in stock returns but also helps expose notable sector-specific effects, especially in sectors where ESG issues are most relevant.