This article uses the empirical evidence of A share listed companies of heavily pollution industry in the Shanghai and Shenzhen Stock Exchange from the year 2008 to 2013 and analyzes the relevance of the amount of corporate environmental investment to the cost of equity capital by using the time fixed effects model. Based on the moderating effect of industry environmental regulation and regional environmental regulation, the degree of influence is different. The result shows that there is an inverted u shaped relationship between the environmental investment and the cost of equity capital. There exists a critical point in the environmental investment. When the environmental investment is higher than the point, the environmental investment is negatively related to the cost of equity capital. Further verifying the environmental regulation effect on the relationship between environmental investment and the cost of equity capital, the result shows that environmental regulation strengthens the inverted u shaped relationship between environmental investment and the cost of equity capital. When environmental investment is lower than the critical point, compared with enterprises in lower environmental regulation, environmental investment has a stronger positive impact on the cost of equity capital in the companies with higher environmental regulation levels. When environmental investment is higher than the critical point, “offsets by innovation” will take a prominent position, and enterprises with higher environmental regulation levels, thus leading to lower cost of equity capital.