2024 Social Impact Investing Report by Kalamazoo Community Foundation

A Note From the CEO

Our community is currently facing visible challenges, such as homelessness and a lack of affordable housing. Our nonprofit partners, changemakers and developers are working tirelessly to find impactful solutions, but securing the necessary funding to bring their projects to life remains a significant hurdle. Without funding, some of these solutions are never applied, community members’ needs go unmet and historically disadvantaged groups remain entangled in the consequences of inequitable systems.

As part of our commitment to better serve every resident of Kalamazoo County and maximize the reach of our giving efforts, we are excited here at KZCF to expand our impact investing strategy and outline in this report how this expansion will address these problems. Impact investing is a powerful tool that our organization is uniquely positioned to use to support long-term growth and sustainability for new and developing organizations and businesses.

As an extension of our overall giving strategy, we hope that by learning more about our impact investing plans for 2025, you become as inspired as we are and ready to stand alongside us as we work to make Kalamazoo County the most equitable place to live.

Dr. Grace Lubwama President/CEO Kalamazoo Community Foundation

2024 Board of Trustees

Artrella Cohn Trustee

Jim Escamilla Trustee

Dr. Jorge Gonzalez Trustee

Xiaoan Li Trustee

Lucas Mansberger Trustee

Kama Mitchell Trustee

Sydney Parfet Trustee

Amy Upjohn Vice Chairperson

Dr. L. Marshall Washington Trustee

Von Washington, Jr. Chairperson

2024 Impact Investment Committee

Jim Escamilla

Lucas Mansberger

Alex Minor

Carl Brown II

Ida Salas

Kathleen Bolter

Nick Boyd

Creating Individual & Community Transformation

What Is a Community Foundation?

ducation E eighborhoods N

is accessible and learners are supported on their journeys.

are vibrant and community spaces nurture health, safety and strong connections.

4. Gather

Beyond grantmaking, KZCF plays a vital role in community development and leadership by working to gather groups of community members together to address systemic issues.

5. Support

To ensure that we can continue to operate at full capacity, we rely on critical support and collaboration within our internal teams, which allows us to provide necessary support to our developing donor base.

Impact Investing Overview

g Social Impact Investing Leads Community Innovation

An Interview With Chief Investment Officer Josh Sledge

What is impact investing, and how long has KZCF been doing this?

“Impact investing is a strategy to make investments in local projects and organizations that are advancing our work to make Kalamazoo a thriving and equitable community. Through these investments, we aim to generate positive social impact alongside financial returns. We like to think of it as doing good while doing well. We use impact investing to finance big, missionaligned infrastructure projects and increase the flow of capital to small businesses and nonprofits in Kalamazoo County.

We were one of the first community foundations to lean into this work over 30 years ago. It was cutting edge. In our early days, KZCF invested in projects like Kalamazoo Neighborhood Housing Services’ renovation of 30 units of affordable housing and the Northside Association for Community Development’s construction of a grocery store. These early investments paved the way, and over time we formalized and broadened impact investing into something very intentional.”

How is impact investing different from traditional investing?

“Take the example of a traditional endowment fund held at KZCF. When donor dollars come in, they’re invested in a mix of stocks, bonds and other investments to grow. As the money grows, the endowment acts as a perpetual pool for funding grants to the community. This sustainability is one way that philanthropy at KZCF is so powerful.

With impact investing, KZCF looks to grow funds by investing in mission-aligned infrastructure projects and organizations in Kalamazoo. For instance, we make low-interest loans to housing developments that bring more affordable housing to the county.

WJosh Sledge is the chief investment officer at Kalamazoo Community Foundation and is responsible for managing the organization’s $720 million in assets spread across 1,100 funds.

While we do get financial returns on these loans, there’s a focus on immediate social impact as well. Our impact investing work is supported by only a handful of our funds – those created to support KZCF’s general ability to provide grants where the community needs them most.”

What makes it such an equitable strategy?

“Because we’re a community foundation and equity is hardwired into our mission, it’s one of the key things we’re looking for in investment opportunities. We want to make sure housing projects are affordable. How are we thinking about closing equity gaps in housing access? Who’s doing the work to build these houses? Are we giving opportunities to people who haven’t had them before? When a housing project comes to us, developers may not have contractors, builders or other partners lined up. How can KZCF be a connector?”

Can you shed light on some barriers that small businesses face and the economic ripple effect that this can create?

“Small businesses are vital to the economy, and access to responsible, affordable capital is essential for them to operate and expand. If you don’t have an established history for your business, it’s hard to go to a bank for lending. Some people raise money from friends and family, but not everyone has wealthy connections to gift or lend them the money they need to start a business. Additionally, there are lots of national, non-bank lending options cropping up, many of which are predatory or have higher costs and fewer protections than traditional lenders. That’s something we want to help entrepreneurs avoid.”

How does KZCF change the small business ecosystem and help entrepreneurs?

“We invest in and partner with lenders that prioritize community development, bringing them to Kalamazoo to provide accessible and low-cost financing to help businesses grow. There are benefits beyond the check, too. We’re proactive in connecting small business owners with the support they need to be successful.”

What does your loan process entail and how is it different?

“We evaluate every opportunity for its financial risk and potential social impact. If we think a project has potential to do something great or someone could be a community champion, we want to hear that story and understand the project. If alignment is there and social impact potential is high, we can be creative in how we structure a deal, because we want the deal to happen.”

KZCF recently announced a new set of focus areas. Can we touch on how you approach each one through impact investing?

“On the WEALTH side, we’re thinking about helping small businesses grow and build wealth. Kalamazoo has long been a home to business innovation, from celery to medical devices, Gibson guitars, and Bell’s beer. We want to see small businesses thrive here. We’re also mindful of how new construction and infrastructure development can support job creation and wealthbuilding for contractors and developers.

Every community is dealing with affordable HOUSING issues right now, and we have a unique role to play in writing low-interest loans to support projects that would struggle to get off the ground otherwise. Affordable housing is huge. We see this as an opportunity for KZCF to make an impact in addressing a major challenge in Kalamazoo right now.

We will work with EDUCATION entities if they need service centers, facilities or infrastructure, and not just schools in the traditional sense – any organization that’s doing educational work could be considered.

We are always looking for local, grassroots organizations that can become permanent institutions for NEIGHBORHOODS to help define and strengthen them. We provide financing for these organizations to build or acquire the property and infrastructure they need to expand their services and support Kalamazoo neighborhoods. We hope to see more beautiful spaces that any community member can walk into and feel deserving of.”

g Low-Cost Financing Helps Deliver Shoes to Kids & More

Maggie Hesketh is the executive director at First Day Shoe Fund (FDSF), a vital nonprofit providing new, high-quality, athletic shoes to students in every public elementary school in Kalamazoo County. FDSF has been dedicated to this equity-building, joy-bringing mission since 2006, and their organization has grown exponentially since its inception, thanks in part to financial support from KZCF over the years. In 2023, they received an impact investment loan from KZCF to finance the purchase of their headquarters and build a stable future in Kalamazoo County. We interviewed Maggie to learn about their funding journey, their loan experience and some inspiring community transformations on the horizon.

Understanding the Challenges

Grants make up the overwhelming majority of the funds that FDSF raises, and Maggie does all of their grant writing herself, about 20 to 30 grant applications per year. As a one-woman fundraising machine and FDSF’s only full-time employee, Maggie said that looking for grants is the most time-consuming part of the process, eating up at least 25% of her time. She finds new sources of funding through exhaustive research. “There are many organizations out there quietly funding nonprofit work who aren’t necessarily broadcasting their funding. I’m willing to do a bit of work to find those groups,” she said.

Despite her luck finding granting sources, few are interested in funding infrastructure or capital projects, two things that can prove incredibly useful for a nonprofit’s longevity Launching a capital campaign is another option to secure funding for such projects, but these campaigns are costly and require tremendous amounts of effort, especially for such a small team.

Deepening the Story

It is a lot of work, but it is for a cause that Maggie believes in strongly. The organization launched in 2006 after FDSF founder Valerie Denghel noticed area school kids wearing flip flops in the winter, shoes with holes, or shoes many sizes beyond fit or comfort. Without the right shoes, a child cannot participate in things like recess, gym or sports. Valerie began buying extra shoes of random sizes and then finding kids who fit them. Despite

her efforts, Valerie could not afford to keep up with the increasing amount of kids that needed shoes on her own. That is how FDSF was born.

Maggie acknowledges that their group is about more than just shoes. “Things are hard for kids. They get bullied already for so many reasons, so if we can give them something that makes them feel special, makes them fit in with their peers and boosts their confidence, I don’t see why we shouldn’t do that.”

Featured Funding Story

Impact Investment Journey

Operating out of a former daycare facility which they have rented for years on Meredith Street in Portage, FDSF buys, sorts and distributes thousands of pairs of shoes each year. When their building’s owners expressed a desire to sell this past year, Maggie was forced to choose: Uproot operations and rent elsewhere or buy the building.

Maggie saw the moment as a unique opportunity to secure a forever home with minimal disturbance to their work and team. FDSF received an impact investment loan through KZCF in order to do just that.

“KZCF was certainly easy to work with and moved very quickly to ensure that we could purchase our building before the end of the year, which was necessary to close our deal,” Maggie said.

“Our bank had been willing to lend us the money, but it would have taken us 20 years to pay off their loan. Interest on our loan with KZCF is so much lower that we’ll be able to pay it off in almost half the time! Both parties were so willing to do what was best for us that they just made it happen.”

- Maggie Hesketh | Executive Director of FDSF

Transformation on the Horizon

Owning their building will enable FDSF to make more dreams come true for their organization and kids and families across the community. Upgrades have already begun. As building owners, they were able to add a receiving entrance and loading area for the hundreds of pairs of shoes that were once awkwardly funneled through the front door each day. Extra bathrooms were converted into useful storage areas.

“We’ll be expanding our services to the YWCA next summer. I’m hoping to find a Swahili translator,” Maggie added. FDSF brings translators to fittings for kids that speak languages other than English, some of whom are refugees. The next items on their to-do list include distributing shoes twice a year to all of their schools instead of just some, adding middle schools into the mix and continuing to go beyond schools to serve other community organizations.

“Equity is everything to us. We have families that tell us every year that we’re the only charitable service they qualify for, even though they’re struggling. Because we afford shoes for their kids, that frees up money to buy winter boots, put gas in the car or pay for groceries. People tell us that these shoes are the first new shoes their kids receive, maybe even the only new piece of clothing they get all year. And that’s why we do it. To give kids and their families a positive, memorable, joyful experience.”

Breaking Barriers to Make Affordable Housing a Reality

A few short years ago, Jamauri Bogan was a star running back, wearing #32 for the Western Michigan University Broncos. Now he is the trailblazing owner and CEO behind Bogan Developments, a real estate company launched in 2020 that seeks to revitalize Brownfield sites – buildings that have fallen into disuse or environmental contamination.

Jamauri is working with KZCF on an impact investment loan to finance Zone 32, a recently completed residential and commercial complex in Kalamazoo’s Northside neighborhood. Zone 32 elevates living standards for children and families through 12 units of highquality, affordable housing and an early learning center affiliated with YMCA of Greater Kalamazoo.