VSCode performs its own variable interpolation on variables set in EnvironmentVariableCollection. Given the following .envrc:
export WOW='${workspaceFolder}'
In regular terminal:
❯ echo $WOW
${workspaceFolder}
In VSCode integrated terminal:
❯ echo $WOW
/Users/zhaofeng/Sandbox
What's worse, exporting any variable containing ${env} locks up the VSCode terminal.