Climate change represents an enormous risk to the financial system. The financial system faces two different kinds of climate-related risks: physical risks, arising from damage to property, infrastructure and land; and transition risk, a result from exposure to industries not built around the economics of low-carbon emissions. Both risks run divergent to each other. This means, in case urgent and drastic measures to combat climate change are taken, transition risk will increase while, in case Governments and other stakeholders fail to combat climate change, physical risks will soar. Consequently, there is no scenario where both risks can be avoided and hence it is imperative that they are recognized within the financial system.