It's probably a safe bet that Al Gore does not invest in the

(FEAOX)

Free Enterprise Action Fund (FEAOX), whose managers insist global warming is hogwash.

However, had Gore invested in the fund, he'd already be up more than 5% so far this year.

Even as consensus is developing among the world's scientists of the significant human impact on global climate change, that hasn't stopped the Free Enterprise Action Fund from taking a contrarian view and turning it into a 5.3% year-to-date return.

"In contrast to Al Gore, the United Nations and many Hollywood celebrities ... the scientific facts about whether humans are harming global climate are far from settled," the fund said in a press release earlier this week. "The debate is not over despite proclamations to the contrary by global warming alarmists."

The fund also announced that it filed a shareholder proposal demanding that

General Electric

(GE) - Get Report

disclose the reasons it believes that "economy-harming global warming regulations are good for its business."

General Electric is the fund's second-largest holding, accounting for 2.8% of assets as of March 31. The fund worries that shareholders might be negatively impacted by GE's participation with environmental protection groups in the U.S. Climate Action Partnership, whose goal is federal greenhouse gas regulation.

The fund's basic theory is a good one. Aggressive shareholder advocacy ought to be used to pressure companies to avoid actions that the fund believes "could devastate economic growth and jeopardize the earnings."

The Free Enterprise Action Fund does not stop there. A truly free enterprise is not subject to government regulations that can produce dead-weight losses to the economy. Worse still would be a company advocating more government regulation of its business to the possible detriment of shareholders.

However, because the fund has a measly $307,000 in the $366 billion giant, trying to influence GE's decisions with its demands is like Don Quixote tilting at windmills.

While a mutual fund fighting back against environmental regulation may seem extreme, it is not that unusual. The environmental group, Co-op America, complained on Monday about the 100 largest U.S. funds voting against every single shareholder proposal on climate change.

Milton Friedman, the 1976 Nobel Prize winner for economics, was right when he said that the "social responsibility of a business is to increase profits." But President Bill Clinton was also correct that we can grow the economy while protecting the environment by using regulation and economic incentives to encourage technological innovation.

Companies such as

Wal-Mart

(WMT) - Get Report

, switching to fluorescent bulbs, are discovering that going "green" saves them money so is good for business. In the long run, mutual funds stand to benefit from this sea change of corporate environmental philosophy, regardless of how the funds vote.

Free Enterprise Action Fund Gets Hot

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Source: Bloomberg

Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.