How does one add a custom iCloud Drive folder to the Finder Favorites sidebar?
A solution is to create a temporary alias of your new folder.


Create a folder in iCloud Drive.
Right-click the folder and select Make Alias.
Drag-and-drop the alias folder (little black arrow on folder symbol) into your sidebar.
You can now delete the alias folder (NOT in the sidebar).


Hope this helps, if not leave a comment.