But impact investing proponents argue that analyzing financial returns alone is misguided.
That is because they are more concerned with whether their money is achieving an outcome, like preserving affordable housing in a gentrifying neighborhood, than whether the investment generates a certain profit. Around 40 percent of impact investors polled by Global Impact said they seek below- market returns.
Counter-intuitively, funds that deliver below-market returns may be the most successful because it indicates they would not otherwise receive funding, said Paul Brest, a professor at Stanford University who teaches courses on impact investing.
"That's the sweet spot for impact investing, because by definition, ordinary investors are not going to invest in that," he said.
REDUCED RENT FOR SERVICES
There were over 400 impact investing funds and products, with $31 billion in committed money, in 2015, the latest year for which data is available from Global Impact.
Run by former hedge-fund manager Bobby Turner, the Turner Multifamily Impact Fund launched in 2015 and raised $264 million in capital. It has so far acquired nine garden-style apartment complexes on the outskirts of cities like Dallas, Austin and Las Vegas, according to the fund's website.
"We're trying to give housing to people who make too much money for subsidized housing but do not make enough for luxury rentals or home ownership," Turner told Reuters.
The apartments are mostly filled with tenants who earn up to 80 percent of an area's median income, and rent is no more than 35 percent of a tenant's salary.
To make the investment sustainable, Turner said tenant turnover must be kept low. The fund tries to do that by providing additional services like community watch groups, free tutoring and on-site clinics run by other residents who work in law enforcement, healthcare or education and receive half-price rent for running these programs.