Function app diagnostics says can't access KeyVault secrets, but environment variables says its connected

Question

When my function app runs, it reads from env variables to get secrets from Key Vault. But its behaving as if it didn't get any values.

When I check env variables in Azure, it says the Key Vault reference is resolved

But in Function App Diagnostics it says that access is denied to secrets in Key Vault

I use Access Policies on KV and the Function Apps system identity has List,Get access to Secrets. And this is exactly how every other Function App in my subscription is configured.

But for some reason this one is not behaving.

Any suggestions on how to troubleshoot this further?