Aswath Damodaran has estimated the implied equity risk premium on the S&P 500 to hover in the range from 3.5% to 6.5% over the last decade: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/home.htm . So it's in the ballpark of how an average stock is expected to perform. (And as a sibling comment says, actual realized performance was even better over the last decade.)

If only, say, 3% annual returns above the interest rate were projected on a project, it would be clearly below the line of viability. There would be no reason to bother with the hassle and risk: just park your money in an index fund.

The markets did more than 12% annual returns for that decade.

That's an average of essentially a lot of different bets. Shale oil was a bet on very high oil prices, this didn't eventuate and they still managed some kind of returns above the interest rates.

Just the market rate of return. If your money could have done better in an index fund, you've lost.