In 2009, OpenPath Investments, a social impact real estate company based in San Rafael, Calif., took a unique approach to improving one of its portfolio properties, a 60-unit apartment complex in Provo, Utah. The firm launched a pilot program aimed at strengthening the social safety net for the low- and middle-income residents while incorporating sustainable practices into their lives. The “UrbanVillage” program, as it is now known, encourages residents to network and take an active role in their communities.

Despite being warned by another large-scale property manager that allowing residents a voice in how their communities were run would create “headaches for management,” OpenPath forged ahead. “To our shock and surprise, the residents came up with community gardens, movie nights, potluck dinners, hobby nights, reading clubs, workout groups and job-networking groups. It was fairly fantastic,” says Peter Slaugh, founder of OpenPath.

The experiment also benefited the firm and its investors. When the property was sold a few years later, the internal rate of return on the deal registered 20% compounded annually. “We had a buyer that loved what we were doing, embraced the UrbanVillage program and actually hired us as a third-party vendor to facilitate the program,” says Slaugh.

For affluent impact investors, socially and environmentally responsible real estate can be both personally rewarding and lucrative. Many private funds in this small but growing space are returning 15% or more annually. “These funds have pretty compellingly attractive returns,” says Dave Hood, senior real assets strategist at Sonen Capital, a San Francisco-based firm that has over $350 million in assets dedicated to impact investing.

Impact investing in real estate is defined as “purchasing physical properties with the intention of earning a financial return through rental income and property value appreciation and/or, for social investors, achieving other social/environmental or socio-economic objectives,” according to “An Overview of Impact Investing” by Phillips Hager & North Investment Management, a division of RBC Global Asset Management. Funds in this space typically buy underperforming properties, then physically improve and manage them in ways that enhance their financial, environmental and social returns.

Not many publicly traded funds provide pure exposure to social and environmental impact real estate. “There’s a much more pervasive universe of choices on the private side,” says Hood, who previously oversaw a $9 billion portfolio of real estate, private equity and natural resources investments for the Stanford University Endowment Fund.

After the 2008 financial crisis, interest in real assets increased as a way to strengthen portfolios through diversification and downside protection. Generating income, a traditional hallmark of real estate investing, is also particularly attractive in today’s near-zero-interest-rate environment. In addition, real estate can act as a hedge against inflation. Since 2008, the contribution to global wealth from real assets has increased almost 5% per year; it is expected to continue to increase at about this rate annually, according to Sonen Capital’s 2014 report, “Real Assets Primer: Research and Thought Leadership on Impact Investing,” which cites research from Credit Suisse.