This study examines the impact of firms' heterogeneous exposure to economic policy uncertainty (EPU exposure) on corporate environmental investment. We find that small and medium-sized enterprises (SMEs) are associated with higher levels of environmental investment when facing increasing EPU exposure. In addition, SMEs facing increasing EPU exposure are more likely to increase environmental investment when they are associated with lower financial constraints, located in more marketized regions, and operate in non-heavily polluting industries. Moreover, this study reveals a positive relationship between environmental investment of SMEs and new bank loan financing. Overall, this study highlights that SMEs react positively to heightened exposure to policy uncertainty as a survival strategy.