NEW YORK (Reuters) - A Texas schools fund said it told BlackRock ( BLK ) on Tuesday it would terminate a contract to manage around $8.5 billion of state money due to the energy investment policies of the world's largest asset manager.

Texas has led politically conservative U.S. states in restricting public funds from doing business with BlackRock ( BLK ), which has itself been a leader among Wall Street firms in embracing environmental, social and governance (ESG) principles.

Texas Permanent School Fund Chair Aaron Kinsey said in a statement posted on X that the fund's relationship with BlackRock ( BLK ) breached state law against investing with companies accused of boycotting energy companies.

"BlackRock's ( BLK ) dominant and persistent leadership in the ESG movement immeasurably damages our state's oil and gas economy and the very companies that generate revenues for our PSF ... The PSF will not stand idle as our financial future is attacked by Wall Street," the statement said.

A BlackRock ( BLK ) spokesperson said, "BlackRock ( BLK ) is helping millions of Texans invest and save for retirement. On behalf of our clients, we've invested more than $300 billion in Texas-based companies, infrastructure and municipalities, including $125 billion invested in the energy sector.

The spokesperson cited a $550 million joint venture with oil and gas firm Occidental Petroleum and an event last month where Chief Executive Larry Fink and a Texas official pledged to work together to invest in the state's energy infrastructure.