Using a manually collected project-level dataset and exploiting the staggered designation of the major cities for environmental protection (MCEP) scheme in China, the authors show that firms increase their environmental investments after their city experiences heightened pollution prevention and control by the government. The effect is mostly driven by “beneficent investments” – environmental projects that not only benefit the firm but also directly spill over to society at large. Following the establishment of the MCEP, media coverage on environmental issues in local cities increases. City officials are more likely to be promoted if they meet pre-set environmental targets or reduce pollution. Firms spending more on green investments pay less in taxes, garner more subsidies, and secure more bank loans. MCEP cities with larger corporate environmental spending reduce pollution and improve local employment to a greater extent. They also attract more high-quality new firms. Heavily polluting firms contribute less to the city’s tax revenue and speed up their expansion to non-polluting industries. Firms investing more on environmental projects – especially the beneficent ones – have larger value gains, produce more green patents, and experience greater labor productivity than other firms in the same MCEP city. The authors' findings highlight the role of regulatory mechanisms in enabling E&G investment to be both value- and welfare-enhancing.