Here's one way to explain sticker shock in the organic produce aisle. Consumer demand for organic products has grown at a double-digit rate every year for more than a decade, according to the United States Department of Agriculture. And the portion of U.S. farmland that is certified organic: 0.6 percent.

That disconnect is what drives Farmland LP, a start-up private equity firm that has an unusual approach to investing in real estate: It acquires conventional farmland and converts it to organic. The idea, says co-founder Craig Wichner, is simple. Organically raised products have higher margins, which gives small farmers a better shot at competing—and environmentally minded investors the opportunity to earn healthy returns while putting their money to good use.

Wichner, 41, is no stranger to mixing mission and money. After graduating from college, he helped launch a biotech company that produced a drug to treat brain cancer; later, he launched a start-up that automated charitable giving programs for major corporations. After the birth of his daughter, in 2006, Wichner grew concerned about the impact of conventional farming. "I saw that organic farming was where society needed to go," he says. "Fortunately, it was a good investment as well."

Investments in farms—both traditional and organic—yielded returns of about 9 percent in 2010, according to the National Council of Real Estate Investment Fiduciaries. Wichner expects his fund to perform at least at that level—with the added benefit of reducing the use of pollutants and pesticides. Since launching in late 2009, he has raised $2.2 million from individual investors and plans to pay quarterly dividends. Debbie Cook, the former mayor of Huntington Beach, California, was one of the first investors: "I thought, How can I invest in something that will actually be an asset for as long as humans exist and grow their own food?"

The fund, which is based in San Francisco, owns two farms on 250 acres in Oregon. Results are already trickling in. In 2010, one of its properties, Fern Road Farm, avoided using about 19,600 pounds of synthetic nitrogen fertilizers and 595 pounds of pesticides—while boosting revenue some 40 percent.