Just as the behavior of the climate can be modelled as interlinking complex systems of the atmosphere, ocean, hydrosphere and biosphere, the climate similarly interfaces with the economy through several coupled mechanisms. The climate is both influenced by the economy through key processes such as the emission of greenhouse gases and land-use change and influences the economy through, for example, changes to extreme weather events, sea level and agricultural growing regions. Climate risk is quantified in dollars and represents the financial impact of climate change on the economy and its individual constituents. Understanding how and where money flows with regard to climate change provides insight into how climate risk can both be mitigated and avoided.

Here we explore the mechanisms by which climate risk enters the economy and identify the actors that are affected by this risk. In particular, the role of the insurance and reinsurance in smoothing and spreading risk and how this function is affected by a changing climate are explained. Further, the propagation of climate risk beyond insurance through banking, asset management and funds management is discussed. This paper intends to provide insight into financial systems for climate scientists seeking to make their research relevant and impactful on the economic drivers of climate risk management.