In Arch, /bin/sh is a symlink to /bin/bash, which has quite a few rules about startup scripts, with special cases when called sh :
If bash is invoked with the name sh, it tries to mimic the startup
behavior of historical versions of sh as closely as possible, …
If you start it from the console, without any command, i.e. as an interactive, non-login shell, you should use the ENV variable :
export ENV=~/.profile
sh
or
ENV=~/.profile sh
When invoked as an interactive [non login] shell with the name sh, bash looks for the variable ENV, expands its value if it is defined, and uses the expanded value as the name of a file to read and execute.
Alternatively you can use the --login option to make it behave like a login shell, and read the .profile file.
sh --login
When invoked as an interactive login shell [with the name sh], or a
non-interactive shell with the –login option, it first attempts to
read and execute commands from /etc/profile and ~/.profile, in that
order