This paper investigates the relationship between Environmental, Social, and Governance (ESG) factors and the financial performance of firms in the Swedish market, along with the influence of board composition. The study analyzes 34 firms listed on the Swedish stock exchange from 2014 to 2023, using regression analysis and the Ordinary Least Squares (OLS) technique to explore the links between sustainable development, board structure and financial performance.

The results show mixed outcomes regarding ESG's impact on financial performance, measured by Tobin’s Q and ROA. ESG factors negatively correlate with market value, while their relationship with ROA is insignificant. A detailed examination of individual ESG pillars also reveals mixed results.

Moreover, the study finds a strong positive relationship between board gender diversity and financial performance, indicating that companies with more women on their boards tend to bemore profitable. However, a higher ESG score appears to diminish the positive effect of adiverse board, as the interaction between ESG and board gender diversity shows a significant negative relationship with market value.

These findings highlight the complex interplay between sustainability efforts, board composition, and firm profitability.