Activist investor Bluebell Capital Partners has asked Glencore to consider a radical new structure for its coal business to turn itself from a “disliked stock” into a top pick for investors targeting sustainability.

Glencore should create a Coal NewCo, splitting its capital into A and B shares, according to a letter sent by Bluebell to the company, a copy of which was reviewed by Bloomberg. Glencore should keep the A shares, representing about a 10th of the economic interest in the NewCo, and spin off and list the B shares.

The new structure would allow the company to keep full governance control and follow its strategy of responsibly running down coal assets, Bluebell said. It would also cut Glencore’s coal exposure to a minimum and help reduce the discount its shares trade at compared to peers who have exited coal.

Bluebell’s letter comes with Glencore poised to report bumper profits this week, partly fueled by record coal prices. The shares are currently trading at the highest in almost a decade.

It also comes as more investors support miners running down coal mines rather than spinning them off -- including BlackRock’s Larry Fink -- worried that the assets would actually produce more coal for longer under new owners.

“The significant exposure to coal makes Glencore a less attractive partner, as coal is effectively a ‘poison pill’ in an industry where further consolidation is needed and expected,” Bluebell partners Giuseppe Bivona and Marco Taricco wrote in the letter dated January 24.

Bluebell’s latest move follows its demand last year asking Glencore to separate its thermal coal business, simplify its asset base and tackle governance issues. In his response, Glencore CEO Gary Nagle has defended the company’s sprawling coal business, saying it will stick to running down the mines over the next three decades.

Glencore, the world’s biggest thermal-coal shipper, counts billionaire former boss and coal business advocate Ivan Glasenberg as its second-biggest shareholder. Qatar Investment Authority and BlackRock are also among its top three investors. Several other ex-managers also have big holdings, meaning forcing challenges may be difficult for Bluebell.

Glencore has promised to run its coal business to closure by 2050, making it carbon neutral, an ambition none of its major rivals have so far been able to match and a policy which received overwhelming support from shareholders. The company has previously said that it’s prepared to exit the coal business if a majority of its shareholders asked for it.

Bluebell argues that following its new approach will help Glencore lure many other institutional investors who have adopted environmental, social and governance policies that prevent them from buying any exposure to coal.

“The reality is that the same investors who do not buy Glencore because of coal, are the same investors who would hold Glencore ex-coal as one of their favourite stocks, due to the company’s leading position in metals supporting the green economy transition and decarbonization,” the Bluebell duo wrote. “Glencore ex-coal should be a top pick in any ESG fund focusing on decarbonization.”

In its response to Bluebell in a letter dated Feb. 8, a copy of which was seen by Bloomberg, Glencore didn’t make any comment on the hedge fund’s proposal for a new company structure.

Bivona confirmed the contents of the two letters, while a spokesperson for Glencore declined to comment.

Bluebell, based in London, was started by Bivona and Taricco in 2019. Since then, it has launched publicly disclosed activist campaigns against about 10 companies from GlaxoSmithKline to Danone. The firm manages about $275-million and made 24.3% return in its Bluebell Active Equity Fund last year.