yarn error on wsl 2

[gln-gln]

Windows Version

Microsoft Windows [Version 10.0.19044.3324]

WSL Version

WSL version: 1.2.5.0

Are you using WSL 1 or WSL 2?

• WSL 2
• WSL 1

Kernel Version

Ubuntu 2

Distro Version

Default Distribution: Ubuntu , Default Version: 2

Other Software

No response

Repro Steps

I have installed wsl on machine using instructions. I have a custom project in which I use yarn to install dependencies. Any command in yarn fails with error :

$yarn install
yarn install v1.22.19
warning ../../../../package.json: No license field
error An unexpected error occurred: "Failed to replace env in config: ${APPDATA}".
info If you think this is a bug, please open a bug report with the information provided in "/mnt/c/Users/project/yarn-error.log".
info Visit https://yarnpkg.com/en/docs/cli/install for documentation about this command.

This error appears only in wsl but works fine in windows. Installed yarn version:

yarn --version
1.22.19

Any suggestions ?

Expected Behavior

$yarn install
yarn install v1.22.19
warning ..\..\..\..\package.json: No license field
[1/4] Resolving packages...
[2/4] Fetching packages...
[3/4] Linking dependencies...
warning "@apidevtools/swagger-cli > @apidevtools/[email protected]" has unmet peer dependency "openapi-types@>=7".
[4/4] Building fresh packages...
$ husky install
husky - Git hooks installed
Done in 45.50s.

Actual Behavior

Fails with error

$ yarn install
yarn install v1.22.19
warning ../../../../package.json: No license field
error An unexpected error occurred: "Failed to replace env in config: ${APPDATA}"

Diagnostic Logs

No response