Option 3: The phrase acts as a noun that is the subject of the sentence.
"Volunteering at the animal shelter in my neighborhood" is a gerund phrase (It begins with a gerund, the "ing" word, and includes others modifiers and objects), and gerund phrases always function as nouns. Therefore, the phrase in the passage acts as a noun, which at the same time is the subject of the sentence since it's what's being discussed.
