<p>This study investigates the relationship between a sustainable-based extracted factor and US mutual fund returns using flexible quantile breakpoints. This was motivated by the lack of consensus on intrinsic factor construction and the limitations of traditional replication methods. Employing tail risk management in extreme quantile value-weighted sustainable portfolios based on long-only trading strategy, this study finds that moderate ESG risk exposure is associated with reduced tail risk, as evidenced by lower VaR values. To assess the factor’s quality, this research shows that it is nonredundant and contributes unique information to explaining US fund returns. Quantile-by-quantile regression analysis reveals a significant and positive impact of the sustainable factor in the middle quantiles, suggesting its positive contribution to fund returns within these ranges. However, its influence diminishes at the extreme highest quantiles, indicating that the factor’s effect is concentrated in the mid-range of the return distribution. This study empowers investors by explaining impact investing principles and highlighting how the constructed ESG risk factor can generate competitive returns even in volatile markets when its risk is well assessed. The QR model findings underscore the importance of ESG factors in asset pricing, affirming the US market’s potential for sustainable investment. This research provides valuable guidance for both academics and practitioners.</p>