One of the first lessons I learned in business school was that for every risk there should be a corresponding rate of return. The greater the risk, the higher the return. Thus, one expects to earn more in the stock market than in a money market fund because of the higher risk.
This formula is somewhat modified for alternative investing. Here, the investor is sometimes willing to accept a lower return to advance the social goals of the project. Call this a “social subsidy.” The amount of this subsidy is a personal decision of each socially conscious investor. Generally, if your return on a loan is more than 3% below what a similar traditional investment would pay, your “subsidy” is bordering on a charitable gift.
