The global mining sector will need to "improve the brand" as capital markets have been demonstrating an increased focus on individual mining companies' licenses to operate, a broad approval metric, according to Ernst & Young Global Mining and Metals Lead Analyst Paul Mitchell.

EY recently ranked the social license to operate as the highest risk facing companies in the metals and mining sector, releasing Sept. 30 the results of a survey of more than 250 industry executives.

Investors have been focusing more on social responsibility and applying that attention on a wider scope than ever before as the license has proven vulnerable to a range of other risks, from a tailings dam break to a global pandemic, Mitchell said during an Oct. 14 webinar.

Mining companies will be in danger of losing their licenses to operate in various jurisdictions if they do not do a better job at working together to create mechanisms for mitigating these risks, Mitchell said, adding that the sector has seen "a real decline in the brand" in the past couple of years.

"We're going to have to see mining companies thinking more broadly: 'What are my responsibilities and who am I responsible to?' They're going to have to operate together to make sure that they improve the brand of the industry as we go on," Mitchell said.

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Public relations quagmires have highlighted the potential political consequences that mining companies face if they ignore communities with a stake in the land the companies seek to mine. Top executives at one of the world's largest mining companies, Rio Tinto, recently stepped down after the company destroyed an ancient Aboriginal heritage site in Western Australia, resulting in greater investor pressure on other companies to avoid damaging culturally sensitive areas.

In addition, the mining sector continues to grapple with the fallout from a 2019 tailings dam collapse at Vale SA's Corrego do Feijao iron ore mine in Brumadinho, Brazil. Concerns regarding tailings dam safety have also been linked to concerns about climate change.

Vale recently secured ratings upgrades in part due to its new tailings management system. Moody's upgraded the company's senior unsecured ratings to Baa3 from Ba1 in early October, and Fitch upgraded its foreign and local currency long-term issuer default ratings to BBB from BBB- in early September.

Mitchell said the International Council on Mining and Metals' effort to establish a global standard on tailings dams was an "excellent" example of industry successfully working as one to improve its brand. The global standard is based on 15 principles and was released in early August.

EY ranked so-called high-impact risks as the second-largest risk facing the metals and mining sector. Explaining the ranking, Mitchell said companies should be preparing for all scenarios around supply or demand disruptions related to the coronavirus pandemic, including a yearslong period without a vaccine.

"Conduct scenario planning for a further six months of disruption, or further 12 of months of disruption, or what happens if we don't have a vaccine and we have to operate with something like COVID for three or four more years," Mitchell said.