We examine how political partisanship affects corporate environmental policies and firm performance. Publicly traded U.S. firms generate more toxic pollution when their CEOs are politically aligned with the president. The effect is amplified by greater political exposure and attenuated by stronger external monitoring. CEO-president political alignment influences the environmental policies of firms through heightened managerial optimism and relaxed regulatory constraints. Politically aligned firms reallocate resources away from environmental mitigation efforts toward expansion and innovation, where both the quantity and quality of innovation increase. Consequently, those firms have higher operating efficiency, higher market valuations, and higher future returns.