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In CAPM we got the market portfolio, so all the company specific risk is eliminated due to benefit of diversification and we are left with non-systematic risk, which is being priced.
In simple words, investing in a well diversified portfolio you can eliminate company specific or industry specific risk which is Nonsystematic risk, this is also known as unsystematic risk, specific risk, diversifiable risk, or residual risk. So when this get eliminated you left with only market specific risk which affect overall market, like inflation affect all sectors some with positive some with negative impact.
So market risk is called systematic risk, and this is priced in CAPM world.